SJW Group (NYSE:SJW) Is Paying Out A Larger Dividend Than Last Year
SJW Group's (NYSE:SJW) periodic dividend will be increasing on the 1st of March to $0.40, with investors receiving 5.3% more than last year's $0.38. This takes the annual payment to 2.5% of the current stock price, which is about average for the industry.
View our latest analysis for SJW Group
SJW Group's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, SJW Group's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. 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 fall by 3.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 55%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
SJW Group Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.73 in 2014 to the most recent total annual payment of $1.52. This works out to be a compound annual growth rate (CAGR) of approximately 7.6% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.
The Dividend Has Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that SJW Group has been growing its earnings per share at 6.3% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
In Summary
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 would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for SJW Group (of which 1 shouldn't be ignored!) 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.
