Aqua America Inc.
) are trading near their 52-week high of $30.33. In fact, the
Bryn Mawr, Pennsylvania-based premier water utility has seen its
stock price climb some 15% since the beginning of the year.
LACLEDE GRP INC (LG): Free Stock Analysis
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PVR PARTNERS LP (PVR): Free Stock Analysis
AQUA AMER INC (WTR): Free Stock Analysis
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Despite this price appreciation, we remain optimistic on the
firm's near-term prospects, supported by consistency in its
earnings/cash flows, attractive fundamentals and a positive
outlook. These factors are reflected in Aqua America's Zacks Rank
#1 (Strong Buy), implying that it is expected to significantly
outperform the broader U.S. equity market over the next one to
Why the Bullishness?
Positioned in a niche industry with high barriers to entry, Aqua
America enjoys near-monopoly status in its area of operation. On
top of this, the utility's best-in-class cost control and limited
credit market exposure presents a unique opportunity to own a
Aqua America pays an annual dividend of 70 cents per share,
yielding a solid 2.3%. The utility hiked its dividend payout by
6.1% in Aug 2012, marking the 22nd dividend increase in as many
years. Aqua America has a long and consistent dividend paying
record, going back more than 65 years. Moreover, Aqua America's
current dividend caps the payout ratio around 55%, reasonable and
in line with peers. This indicates enough headroom for future
dividend increases given the utility's strong management and
solid financial position.
Further, we believe that Aqua America's April 2012 start-up of
its Marcellus shale pipeline joint venture with
PVR Partners L.P.
) has been a key catalyst in diversifying its portfolio outside
of the core business of regulated water services. The venture
aims to supply fresh water to energy companies' drill sites in
Overall, opportunities for drinking water suppliers like Aqua
America are set to improve, as it captures the economic benefit
of dealing with a natural resource with no substitute and future
projected demand/supply imbalance.
Other Stocks to Consider
In addition to Aqua America, there are certain other utilities
The Laclede Group Inc.
Pike Electric Corp.
) that offer great value and are worth buying now. All these
firms sport a Zacks Rank #1 (Strong Buy).