The York Water Company (NASDAQ:YORW) has announced that it will pay a dividend of $0.2108 per share on the 15th of October. This makes the dividend yield about the same as the industry average at 2.2%.
See our latest analysis for York Water
York Water's Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, York Water was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
EPS is set to fall by 1.7% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 56%, which is comfortable for the company to continue in the future.
York Water Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2014, the dividend has gone from $0.553 total annually to $0.843. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. 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. York Water has seen EPS rising for the last five years, at 8.0% per annum. 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 probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for York Water (of which 1 shouldn't be ignored!) you should know about. 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.
About NasdaqGS:YORW
York Water
The York Water Company impounds, purifies, and distributes drinking water.
Average dividend payer with questionable track record.
