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The York Water Company (NASDAQ:YORW) will increase its dividend from last year's comparable payment on the 14th of July to $0.2027. This makes the dividend yield about the same as the industry average at 1.9%.
See our latest analysis for York Water
York Water's Dividend Is Well Covered By Earnings
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, York Water's earnings easily covered the dividend, but free cash flows were negative. 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 8.6% 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.
York Water Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.534 in 2013, and the most recent fiscal year payment was $0.811. This means that it has been growing its distributions at 4.3% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.
The Dividend Has Growth Potential
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 6.1% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for York Water (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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