SJW Group (NYSE:SJW) Is Increasing Its Dividend To $0.38

SJW Group's (NYSE:SJW) dividend will be increasing from last year's payment of the same period to $0.38 on 1st of June. Based on this payment, the dividend yield for the company will be 2.0%, which is fairly typical for the industry.

View our latest analysis for SJW Group

SJW Group's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, SJW 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.

Looking forward, earnings per share is forecast to rise by 9.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 57%, which is in the range that makes us comfortable with the sustainability of the dividend.

SJW 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 annual payment back then was $0.71, compared to the most recent full-year payment of $1.52. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Although it's important to note that SJW Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On SJW Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While SJW Group is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for SJW Group (of which 1 makes us a bit uncomfortable!) you should know about. Is SJW Group 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.