Artesian Resources' (NASDAQ:ARTN.A) Dividend Will Be Increased To $0.284
Artesian Resources Corporation (NASDAQ:ARTN.A) will increase its dividend from last year's comparable payment on the 26th of May to $0.284. This takes the annual payment to 2.0% of the current stock price, which is about average for the industry.
See our latest analysis for Artesian Resources
Artesian Resources' Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Artesian Resources' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
The next year is set to see EPS grow by 9.4%. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.
Artesian Resources 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. The annual payment during the last 10 years was $0.791 in 2013, and the most recent fiscal year payment was $1.11. This means that it has been growing its distributions at 3.5% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend's Growth Prospects Are Limited
The company's investors will be pleased to have been receiving dividend income for some time. However, Artesian Resources has only grown its earnings per share at 3.0% per annum over the past five years. Growth of 3.0% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.
Our Thoughts On Artesian Resources' Dividend
In summary, while it's always good to see the dividend being raised, we don't think Artesian Resources' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Artesian Resources you should be aware of, and 1 of them is concerning. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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