Updated 3/6/25
Artesian Resources Corporation (NASDAQ: ARTNA) might not be the first stock that comes to mind when thinking about dividend investing, but that’s part of what makes it interesting. As a water utility serving Delaware, Maryland, and Pennsylvania, it operates in an essential industry that provides stability, even when the broader market gets turbulent.
Utility stocks often fly under the radar because they don’t offer explosive growth. But what they lack in excitement, they make up for in reliability. Artesian has built a strong foundation over the years, consistently delivering earnings and, most importantly, dividends to shareholders.
With the stock trading around $31.31, down significantly from its 52-week high of $41.29, there may be an opportunity here for long-term investors who value steady income. Let’s take a closer look at its dividend, financials, and what investors should keep in mind.
Key Dividend Metrics
🔹 Dividend Yield: 3.77% (Forward)
🔹 Annual Dividend Payout: $1.21 per share
🔹 5-Year Average Dividend Yield: 2.66%
🔹 Payout Ratio: 60.02%
🔹 Dividend Growth: Consistently increasing
🔹 Ex-Dividend Date: February 7, 2025
🔹 Next Payment Date: February 21, 2025
Dividend Overview
For dividend investors, stability is everything. Artesian’s 3.77% yield is well above its five-year average, making this a potentially attractive entry point for those looking for income.
The utility sector isn’t known for volatility, and that’s a good thing when it comes to dividends. Because people will always need water, revenue streams remain steady even during economic downturns. That consistency translates into reliable dividend payments, which Artesian has been delivering for years.
With a payout ratio of 60%, the company is striking a balance between rewarding shareholders and reinvesting in its business. It’s not paying out so much that a cut would be a concern, but it’s also returning a meaningful portion of its earnings to investors.
Dividend Growth and Safety
One of the most important things to consider with dividend stocks isn’t just what they pay now but whether they can continue increasing those payouts over time. Artesian has a history of raising its dividend, which is a good sign for long-term investors.
The company’s 60% payout ratio suggests it has room to keep growing its dividend while maintaining financial flexibility. Meanwhile, an operating margin of 37.56% indicates that Artesian runs an efficient business.
On the flip side, debt is something to watch. The company’s debt-to-equity ratio of 77.06% is on the higher side, meaning it relies on borrowed money to finance its operations. While that’s not uncommon for utilities, it does introduce some risk if borrowing costs rise.
Dividend Safety Outlook
✔️ Consistent revenue from a regulated industry
✔️ Reasonable payout ratio supports future growth
⚠️ Debt levels could limit financial flexibility
Chart Analysis
Overall Trend
The price action for Artesian Resources Corporation (ARTNA) over the past year reflects a steady decline, with some recent signs of stabilization. The stock is currently trading at 31.94, showing a modest bounce from its lows but still facing resistance at key levels.
Moving Averages and Trend Strength
One of the most notable aspects of this chart is the downward trend in both the 50-day and 200-day moving averages. The 50-day moving average (orange line) has been sloping downward since mid-2024, remaining well below the 200-day moving average (blue line). This type of setup typically indicates a prolonged bearish trend, with no clear sign of a reversal yet.
Volume and Market Participation
Volume has been relatively light, with a few notable spikes, particularly in mid-July. This suggests that most of the recent price movement has occurred on lower participation, meaning there is not strong buying conviction at current levels. A sharp increase in volume alongside price movement would be needed to confirm any potential trend change.
Relative Strength Index (RSI) and Momentum
The Relative Strength Index (RSI) at the bottom of the chart indicates that the stock is currently in neutral territory—neither overbought nor oversold. This suggests that while the stock isn’t in immediate danger of a breakdown, there also isn’t strong bullish momentum supporting a reversal.
Short-Term Price Action
Over the last five trading days, the stock has attempted a small upward move but is struggling to break above the 50-day moving average. This level will be key going forward. If the stock can push above it with strong volume, it could signal a short-term shift in sentiment. However, if it fails to break through, it could mean a continuation of the broader downward trend.
Analyst Ratings
Artesian Resources Corporation (ARTNA) has received varying assessments from analysts, reflecting a balanced outlook on the company’s performance.
Upgrades:
- Initiation of Coverage with Buy Rating: In October 2021, Janney Montgomery Scott began coverage on ARTNA with a Buy rating, citing the company’s consistent financial performance and strong position in the regulated water utility sector.
Downgrades:
- Downgrade to Neutral: In March 2016, Baird adjusted its rating for ARTNA from Outperform to Neutral, expressing concerns over valuation metrics at that time, suggesting the stock’s price had reached a level where future appreciation might be limited.
- Downgrade to Underperform: In October 2015, Hilliard Lyons downgraded ARTNA from Neutral to Underperform, attributing the decision to anticipated challenges in the company’s growth trajectory, possibly due to regulatory constraints or market conditions affecting the water utility industry.
Consensus Price Target:
Analysts have set a 12-month price target for ARTNA at $46.00, reflecting expectations of the company’s performance based on current market conditions and operational outlook.
These mixed analyst opinions and the established price target provide investors with a nuanced view of Artesian Resources Corporation’s potential, considering both its strengths and the challenges it may face in the industry.
Earnings Report Summary
Artesian Resources Corporation recently released its third-quarter and year-to-date financial results for 2024, showing solid growth in revenue and profitability. The company, which provides water and wastewater services across the Delmarva Peninsula, continues to benefit from rate adjustments, increased water usage, and an expanding customer base.
Third Quarter Highlights
- Revenue came in at 29.1 million for the quarter, a 9.7 percent increase compared to the same period last year. This growth was largely driven by a temporary rate increase that later became permanent at a slightly higher level. The dry weather also played a role, as customers used more water than usual.
- Net income reached 6.8 million, which is 34.4 percent higher than last year. That kind of earnings growth suggests the business is running efficiently and managing costs well.
- Earnings per share came in at 66 cents, up from 49 cents in the same quarter last year, showing that Artesian continues to deliver value to shareholders.
Year-to-Date Performance
- For the first nine months of the year, total revenue was 81.1 million, up 9.6 percent from last year. The company’s ability to grow revenue consistently is a good sign for investors.
- Year-to-date net income reached 20 million, increasing 23.5 percent from the prior year. This steady growth reinforces Artesian’s ability to generate strong returns.
- Earnings per share for the first nine months was 1.95 dollars, compared to 1.58 dollars last year.
What’s Driving the Growth?
The biggest driver of revenue growth has been higher water sales, which increased by 10 percent. This was due to the company’s rate changes, higher water consumption because of dry weather, and a steady increase in customers. Wastewater services also contributed to growth, though to a smaller extent.
Cost Management and Expenses
Running a water utility isn’t cheap, and Artesian saw operating expenses increase by 5.6 percent compared to last year. The rise was mainly due to higher costs for water treatment, chemical use, payroll, and power. These are normal expenses for a company in this sector, but they are worth watching to ensure they don’t outpace revenue growth.
Infrastructure and Future Plans
Artesian has been investing heavily in infrastructure to maintain reliable water and wastewater services. The company is also preparing for potential regulatory changes, particularly regarding PFAS treatment, a hot topic in the water industry. Getting ahead of these regulations should help the company avoid costly compliance issues down the line.
The overall picture is one of steady, well-managed growth, with Artesian benefiting from rate increases, rising demand, and strategic investments in its operations.
Financial Health and Stability
Artesian has several strengths that make it attractive to income investors. It operates with a solid profit margin of 18.96%, and its revenue grew by 9.7% year over year, showing that the business continues to expand. Return on equity sits at 8.56%, which is respectable for a utility company.
However, there are a few areas of concern. The company carries $183.64 million in debt while holding only $10.7 million in cash. That’s not an ideal ratio, as it suggests Artesian doesn’t have a lot of liquidity.
Another red flag is its negative free cash flow of -$9.02 million. This suggests that Artesian is spending more on capital expenditures than it’s generating in cash. While infrastructure investments are necessary for a utility company, investors should monitor whether cash flow improves in the coming quarters.
Valuation and Stock Performance
At its current price of $31.31, Artesian trades at a price-to-earnings ratio of 16.38. That’s a reasonable valuation for a stable utility stock and is lower than its historical average, which could indicate a good value opportunity.
The forward P/E ratio of 15.97 suggests that earnings expectations are steady. However, the stock has struggled lately, dropping 25% from its 52-week high of $41.29. It’s also trading below its 50-day and 200-day moving averages, indicating that the trend has been downward.
For dividend investors, this could be a silver lining. A lower stock price means a higher dividend yield, which may present an opportunity for those willing to hold for the long term.
Risks and Considerations
Interest Rate Sensitivity
Utility stocks often behave like bonds, meaning their appeal tends to decline when interest rates rise. If rates remain elevated, Artesian’s stock price may stay under pressure as investors look elsewhere for yield.
Regulatory Challenges
Because Artesian operates in a regulated industry, it doesn’t have the flexibility to raise prices at will. If regulators limit how much it can charge customers, revenue growth could slow, making it harder to increase dividends in the future.
Debt Load
A debt-to-equity ratio of 77% is something to keep an eye on. While utilities often carry debt to fund infrastructure projects, higher interest rates could make that debt more expensive to manage.
Cash Flow Concerns
Negative free cash flow means that Artesian is currently spending more than it’s bringing in. While this isn’t uncommon for utilities investing in growth, it’s worth monitoring to ensure the company isn’t stretching itself too thin.
Final Thoughts
Artesian Resources isn’t a stock that’s going to make headlines, but that’s exactly what makes it appealing for dividend investors. It offers steady income, a reliable business model, and a history of growing its dividend.
With a yield of 3.77%, a sustainable payout ratio, and a defensive position in the market, it fits well into an income-focused portfolio. The recent stock price drop may create an opportunity for those who believe in its long-term stability. However, investors should keep an eye on its debt levels, cash flow, and regulatory environment.
For those looking for dependable dividends in a sector that stands the test of time, Artesian is a name worth considering.
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