Stock Analysis

California Water Service Group (NYSE:CWT) Is Increasing Its Dividend To $0.26

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California Water Service Group (NYSE:CWT) will increase its dividend from last year's comparable payment on the 17th of February to $0.26. The payment will take the dividend yield to 1.7%, which is in line with the average for the industry.

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California Water Service Group's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, California Water Service Group 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.

The next year is set to see EPS grow by 51.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.

NYSE:CWT Historic Dividend January 31st 2023

California Water Service Group 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 $0.63 total annually to $1.04. This means that it has been growing its distributions at 5.1% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately, California Water Service Group's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. California Water Service Group is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On California Water Service Group's Dividend

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. We don't think California Water Service Group 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, California Water Service Group has 5 warning signs (and 1 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

What are the risks and opportunities for California Water Service Group?

California Water Service Group, through its subsidiaries, provides water utility and other related services in California, Washington, New Mexico, Hawaii, and Texas.

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  • Earnings are forecast to grow 9.61% per year


  • Shareholders have been diluted in the past year

  • Has a high level of debt

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