York Water (NASDAQ:YORW) Will Pay A Larger Dividend Than Last Year At $0.2027

The York Water Company (NASDAQ:YORW) will increase its dividend from last year's comparable payment on the 16th of October to $0.2027. This takes the annual payment to 2.0% of the current stock price, which is about average for the industry.

View our latest analysis for York Water

York Water's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. 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. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 5.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

York Water Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from $0.534 total annually to $0.811. This works out to be a compound annual growth rate (CAGR) of approximately 4.3% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

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. York Water has seen EPS rising for the last five years, at 7.0% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

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. While York Water is earning enough to cover the payments, the cash flows are lacking. We don't think York Water is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for York Water (1 is a bit unpleasant!) 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.