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York Water's (NASDAQ:YORW) Shareholders Will Receive A Bigger Dividend Than Last Year

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The board of The York Water Company (NASDAQ:YORW) has announced that it will be increasing its dividend on the 14th of April to US$0.19. Based on the announced payment, the dividend yield for the company will be 1.7%, which is fairly typical for the industry.

Check out our latest analysis for York Water

York Water's Earnings Easily Cover the Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, York Water's earnings easily covered the dividend, but free cash flows were negative. 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.

Looking forward, earnings per share is forecast to rise by 2.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 61% by next year, which is in a pretty sustainable range.

historic-dividend
historic-dividend

York Water Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.52 in 2012, and the most recent fiscal year payment was US$0.78. This means that it has been growing its distributions at 4.1% 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.

York Water Could Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see York Water has been growing its earnings per share at 5.6% a year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

In Summary

Overall, we always like to see the dividend being raised, but we don't think York Water will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think York Water is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for York Water that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.