Water Hose

Water Utility Stocks

Utilities are some of my favorite stocks for income because of their consistent growth and recession-proof nature. Consumers might forego their daily latte, delay spending on technology or clothes, or cut back on eating out at restaurants when times are tough, but they will do everything possible to keep their lights and water on.

Not only are utility stocks recession resistant, but they are also immune to competition, as utilities are one of the few industries where a monopoly is acceptable.

Water, gas, and electric utilities are often the sole provider for the communities they serve, and are allowed by regulating agencies to set rates that give a reasonable return on investment for the company.

The combination of recession resistance and regulated earnings makes for slow and steady growth. This is evidenced by some of the long dividend growth streaks by water stocks in the sector.

For example, American States Water Company $AWR has paid increasing dividends for the last sixty-three years.

AWR 20YR FAST Graph
American States Water Company – 20YR FAST Graph

It has grown earnings at a 6% rate over the last 20 years, and in a show of its consistency, had just three years of negative growth during that period.

Aqua America Inc. $WTR has a twenty-five year streak of dividend growth, and has grown earnings at a 7.2% annualized rate over the last two decades.

WTR 20YR FAST Graph
Aqua America Inc. – 20 Year FAST Graph

It too has been remarkably consistent, with just one year in the last twenty of negative earnings growth.

Water Utility Watch List

The first sector-based watch list I ever published on Seeking Alpha was for the utilities sector. For that list, I decided to concentrate strictly on the electric and gas companies, while leaving the water utility companies off. However, it didn’t take long before I got a request from a reader to perform similar coverage on the water utilities.

Never one to disappoint readers, I obliged, and created a new watch list of the nine dividend paying water companies found on the late David Fish’s U.S. Dividend Champions List.

Much like their electric and gas brethren, the water companies are also excellent sources of reliable dividend income. Of the nine companies on the list, eight of them have produced dividend growth streaks of twenty years or more, and the other, American Water Works Company $AWK, is well on its way to meeting that distinction.

These companies don’t yield as much as some other stocks in the market, but you’d be hard pressed to find another sector with such long track records of dividend growth.

Here is the watch list, with information updated as of June 12th:

A PDF of this watch list can be downloaded HERE.

The document above has the historical dividend growth rates, current dividend rates and yields for each company. I’ve also included analyst 2018 earnings estimates, my dividend growth forecasts, and valuation targets for readers.

I hope people find this information useful in their due diligence efforts.

If you have interest in reading more of my thoughts on water companies, please check out these other articles I’ve written about the sector on Seeking Alpha.

The Top Water Utility Stocks For Growth And Income

Return to Sector Watch Lists

A Site For Do-It-Yourself Dividend Growth Investors

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