Essential Utilities Inc's Dividend Analysis
Assessing the Sustainability and Growth of Essential Utilities Inc's Dividends
Essential Utilities Inc (NYSE:WTRG) recently announced a dividend of $0.31 per share, payable on 2024-03-01, with the ex-dividend date set for 2024-02-08. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Essential Utilities Inc's dividend performance and assess its sustainability.
What Does Essential Utilities Inc Do?
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Essential Utilities is a Pennsylvania-based holding company for U.S. water, wastewater, and natural gas distribution utilities. The company's water business serves 3 million people in eight states. Nearly three fourths of its water earnings come from Pennsylvania, primarily suburban Philadelphia. Its Peoples subsidiary serves more than 700,000 gas distribution customers in Pennsylvania and Kentucky. Essential exited its noncore competitive water and energy services businesses.
A Glimpse at Essential Utilities Inc's Dividend History
Essential Utilities Inc has maintained a consistent dividend payment record since 1985. Dividends are currently distributed on a quarterly basis.
Essential Utilities Inc has increased its dividend each year since 1985. The stock is thus listed as a dividend aristocrat, an honor that is given to companies that have increased their dividend each year for at least the past 39 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Essential Utilities Inc's Dividend Yield and Growth
As of today, Essential Utilities Inc currently has a 12-month trailing dividend yield of 3.36% and a 12-month forward dividend yield of 3.47%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Essential Utilities Inc's annual dividend growth rate was 7.00%. Extended to a five-year horizon, this rate stayed the same. And over the past decade, Essential Utilities Inc's annual dividends per share growth rate stands at 7.50%.
Based on Essential Utilities Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Essential Utilities Inc stock as of today is approximately 4.71%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Essential Utilities Inc's dividend payout ratio is 0.67.
Essential Utilities Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Essential Utilities Inc's profitability 8 out of 10 as of 2023-09-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Essential Utilities Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Essential Utilities Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Essential Utilities Inc's revenue has increased by approximately 28.30% per year on average, a rate that outperforms approximately 90.89% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Essential Utilities Inc's earnings increased by approximately 14.70% per year on average, a rate that outperforms approximately 71.43% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of 6.30%, which outperforms approximately 53.56% of global competitors.
Conclusion: A Robust Dividend Profile Backed by Solid Fundamentals
Essential Utilities Inc's consistent dividend growth, prudent payout ratio, and robust profitability and growth metrics paint a picture of a company with a solid foundation for continued dividend payments. The company's history as a dividend aristocrat and its forward-looking growth prospects should provide reassurance to value investors seeking reliable income streams. With the latest dividend announcement, it appears that Essential Utilities Inc remains committed to rewarding its shareholders with sustainable and growing dividends.
GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
