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Hate Risk? You'll Love These 3 Stocks Poised to Keep Outperforming the Market

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The global healthcare titan that pays a healthy dividend

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Like J&J, leading water utility American Water Works was founded in 1886, just as the second leg of the Industrial Revolution in the U.S. was getting under way. Its stock, however, has only been listed on a U.S. exchange since 2008, when a German energy conglomerate spun it off.

American Water takes a back seat to no company in the world when it comes to providing an indispensable product or service. Most of us would perish in a mere three to five days without having any water to drink.

As the largest publicly traded water utility in the U.S., American Water provides water and wastewater services to about 15 million people in 47 U.S. states and Ontario, Canada. The lion's share of its revenue is generated by its regulated business, which operates in 16 U.S. states, though it also has several market-based businesses.

The company also has good growth prospects. There's plenty of room for its regulated business to grow through continued acquisitions because the water utility industry in the U.S. is quite fragmented. Analysts estimate it will grow EPS at an average annual rate of 7.6% over the next five years. American Water also pays a modest dividend, currently yielding 2.02%. It's raised its dividend every year since it went public in 2008. This doesn't necessarily mean, however, that it will continue doing so.

North America's leading garbage company

Waste Management is North America's largest waste handling company, providing collection, transfer, recycling, resource recovery, and disposal services to residential, commercial, industrial, and municipal customers. The company was officially founded in 1968, but its roots go back to 1893 when an entrepreneurial Dutch immigrant began hauling garbage in Chicago using a horse-drawn wagon.

Waste Management operates in an industry with considerable barriers to entry, which include high, fixed start-up costs, longtime relationships with customers, and regulatory hurdles with respect to landfills. These factors help keep potential new competitors at bay.

The company has a reputation for being shareholder-friendly. It has raised its dividend, currently yielding 2.36%, every year since 2004. Waste Management's cash dividend payout ratio is just 51.2%. As noted previously, a ratio of about 60%-65% or less suggests that a company can comfortably afford its dividend payments and investors can likely expect future dividend hikes. The company also actively buys back its stock.

Moreover, there's more growth potential in trash than most folks might expect -- something sure to please both investors and Oscar the Grouch. Analysts project Waste Management will grow EPS at at an average annual rate of 10.6% over the next five years.

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Beth McKenna has no position in any stocks mentioned. The Motley Fool owns shares of Waste Management. The Motley Fool recommends Johnson and Johnson. The Motley Fool has a disclosure policy .

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

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

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