York Water's (NASDAQ:YORW) Dividend Will Be Increased To $0.2027

The board of The York Water Company (NASDAQ:YORW) has announced that it will be paying its dividend of $0.2027 on the 14th of April, an increased payment from last year's comparable dividend. This takes the annual payment to 1.9% of the current stock price, which is about average for the industry.

See our latest analysis for York Water

York Water's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, York Water's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 7.1%. If the dividend continues on this path, the payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

York Water Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $0.534 total annually to $0.811. This implies that the company grew its distributions at a yearly rate of about 4.3% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

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 6.2% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 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.