Yahoo Finance Artesian Resources' (NASDAQ:ARTN.A) Shareholders Will Receive A Bigger Dividend Than Last Year
Artesian Resources Corporation's (NASDAQ:ARTN.A) dividend will be increasing from last year's payment of the same period to $0.2955 on 28th of May. The payment will take the dividend yield to 2.9%, which is in line with the average for the industry.
View our latest analysis for Artesian Resources
Artesian Resources' Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Artesian Resources' earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Over the next year, EPS is forecast to expand by 11.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 63%, which is in the range that makes us comfortable with the sustainability of the dividend.
Artesian Resources Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was $0.823 in 2014, and the most recent fiscal year payment was $1.16. This means that it has been growing its distributions at 3.5% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
Artesian Resources May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Artesian Resources' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Growth of 1.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.
In Summary
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. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Artesian Resources (of which 1 is a bit concerning!) you should know about. 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.
