York Water (NASDAQ:YORW) Is Paying Out A Larger Dividend Than Last Year

The York Water Company (NASDAQ:YORW) will increase its dividend from last year's comparable payment on the 16th of January to $0.2108. Based on this payment, the dividend yield for the company will be 2.2%, which is fairly typical for the industry.

View our latest analysis for York Water

York Water's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last payment, York Water's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 2.4%. If the dividend continues on this path, the payout ratio could be 52% by next year, which we think can be pretty sustainable going forward.

York Water Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from $0.553 total annually to $0.843. This means that it has been growing its distributions at 4.3% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

York Water Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that York Water has been growing its earnings per share at 9.1% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On York Water's Dividend

In summary, while it's always good to see the dividend being raised, we don't think York Water's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for York Water (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is York Water not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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