The York Water Company: 200 Years Of Dividends, But Shares Are Expensive

By | December 30, 2015

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York continues to be an excellent dividend payer with a great history. It recently raised its dividend by 4%. The shares look fairly expensive at these levels. In January of 2015, I originally wrote about The York Water Company (NASDAQ: YORW ). In that article, I highlighted its record setting dividend paying history as well as its more recent dividend growth history. While the company continues to be an extremely strong and reliable dividend payer, its shares are looking pricey right now. Before getting to the shares, let’s take a look at the dividend again. With its most recent raise of 4% in November, the dividend now stands at $0.622 annually. This makes the forward yield about 2.37%. This is extremely low for a utility in the first place. However, let’s give some credit where credit is due. This declaration was York’s 580th consecutive dividend declaration. Their consecutive streak of paying dividends has now hit 200 years. In the press release , the company also claims that this is believed to be the longest record of consecutive dividends in America. The streak is just downright impressive. On the other hand, “consecutive years” is a lot different than “consecutive years of growth.” But… the company has one of these streaks as well. This most recent increase bumps its current dividend growth streak to 19 years. YORW Dividend data by YCharts While the dividend growth rate has not been necessarily stellar over the past few years, it has been a lot better than nothing. The 5-year DGR is roughly 3.6%. While it has maintained this growth, it is also keeping a relatively safe payout ratio. With trailing earnings of 98 cents, the current payout ratio is about 63%. I believe considering the majority of its business is regulated and extremely defensive in nature that this is a prudent payout. While the dividend is looking solid as ever, the shares are not. Shares are up almost 35% from 52-week lows. This run up has obviously pushed the yield to a very low level historically. Its 5-year average yield is 2.84%. The point here is that while the dividend is attractive there is not a particular reason for the yield to be so low. YORW PS Ratio (TTM) data by YCharts Fundamentally, shares haven’t seen these high levels since 2006-2007. And as I said, there just doesn’t seem to be a good reason for it. Sales for 2015 are supposed to finish up 2.8% higher than last year. Next year’s sales are expected to be 3.5% higher. Earnings are expected to be up 6.4%. These aren’t bad numbers. They just aren’t all that great and certainly don’t justify such high fundamentals. Trading at roughly a little more than 26 times both trailing earnings as well as forward earnings things don’t look any better when we look at the shares from an earnings basis. This P/E is actually higher than comparable peers such as Middlesex (NASDAQ: MSEX ) and Aqua America (NYSE: WTR ) as well. Don’t get me wrong, I do believe that these water utilities should trade with a nice premium. The name of the game here is consistency. These businesses don’t falter much, even in bad times, and there are massive barriers to entry. However, I strongly believe the market has priced in too much of a premium currently and pushed these shares into overvalued territory. YORW data by YCharts In conclusion, York has been a solid dividend payer for 200 years now. It is immensely impressive that not only has the company never broken that streak but also tagged along a dividend growth streak of 19 years. With the most recent raise, the dividend is looking very good, but the shares are not. These levels are fundamentally way too high and have no real forward catalysts to justify it. The shares are far too expensive to be a buyer at these levels in my opinion. Scalper1 News

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