American Water's Stock, Dividend Yield Easily Top S&P

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American Water Works ( AWK ), America's largest listed water and wastewater utility, has boosted its dividend every year since going public in 2008. The stock has also fared well.

The New Jersey-based company, which was spun off by European utility RWE, operates in more than 40 states and parts of Canada. It's expanded from 32 states in 2008 due mainly to acquisitions.

Profits have increased steadily in recent years, growing even during the 2008-09 recession. As a result, the stock has a five-year earnings Stability Factor of 6 on a scale of 1 (most stable) to 99 (least stable).


Its latest earnings report, released Aug. 6, showed that profit for the second quarter increased 7% from the same period last year. The result was lower than expected and marked a slowdown from gains of 57% and 33% in Q4 of 2013 and in Q1 of this year, respectively.

Revenue for the period rose 5%, slowing from a 7% increase in Q1, as fallout from tainted drinking water due to a chemical spill in West Virginia tempered gains from new customers and higher rates.

Yet the stock is trying to rebound after falling below its 50-day line before the earnings report. It's up 14% this year, easily outpacing the S&P 500's 5% gain. It's also working on a flat base with a 49.65 buy point.

American Water boasts an annual dividend yield of 2.6% at the current share price, well above the S&P average of 1.93%.

The company's most recent dividend hike came in April, when the company boosted its quarterly payout by 3 cents, or 11%, to 31 cents a share.

American Water last month purchased the water and wastewater assets of the Mt. Ebo Water Works and Mt. Ebo Sewage Works as it expands into upstate New York. It also recently purchased water and wastewater assets from the city of Millersburg, Ky., as part of a strategy to grow by acquisitions.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: AWK

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