We came across a bullish thesis on American Water Works Company, Inc. (AWK) on Max Dividends’ Substack by Max Dividends. In this article, we will summarize the bulls’ thesis on AWK. American Water Works Company, Inc. (AWK)’s share was trading at $137.66 as of Oct 25th. AWK’s trailing and forward P/E were 28.09 and 24.27 respectively according to Yahoo Finance.
A treatment plant with a large industrial wastewater treatment pipe in the foreground.
American Water Works (NYSE: AWK) provides water and wastewater services in the U.S., and is a standout in the utility sector, with a remarkable track record of dividend growth spanning 17 consecutive years. This established company, founded in 1886 and headquartered in Camden, New Jersey, serves approximately 3.5 million customers across 1,700 communities in 14 states, making it the largest and most geographically diverse utility provider in the U.S. Currently, American Water Works offers an annual dividend of $3.06 per share, yielding 2.17%. While this yield may not be flashy, it reflects the company’s commitment to stable, long-term income, appealing to dividend investors looking for consistent growth.
Notably, American Water Works has achieved an impressive average annual dividend growth rate of 8.91% over the past three years, alongside increasing its dividend for 17 consecutive years—a rarity in the utility space where high growth rates are often hard to find. This consistent performance positions the company among the elite Dividend Contenders, offering a combination of stability and growth that should capture the attention of long-term investors. The company maintains a healthy dividend payout ratio of 62.07%, which is well below the 75% threshold commonly deemed safe for utilities. This conservative approach not only assures the sustainability of its dividends but also leaves ample room for future growth, providing investors with peace of mind regarding their income stream.
In addition to strong dividend metrics, American Water Works demonstrates robust financial health. The company has shown positive sales growth, increased profitability, and a consistent upward trend in earnings per share over the years. These factors underscore American Water Works’ ability to navigate challenges effectively, delivering consistent results to its shareholders. As investors keep an eye on their portfolios, it is crucial to monitor the financial health of companies like American Water Works, as stronger financials typically correlate with better investment outcomes.
Despite competition from peers like IDA Corp Inc., MGE Energy Inc., and Ameren Corp., American Water Works’ historical resilience and long-standing reputation in the industry position it favorably for future growth. With a strong Financial Score of 83 out of 99, this utility stock is well-poised for investors seeking both stability and growth in their portfolios. Overall, American Water Works appears to be a solid candidate for those looking to add a reliable, dividend-growing asset to their investment strategy.
American Water Works Company, Inc. (AWK) is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held AWK at the end of the second quarter which was 36 in the previous quarter. While we acknowledge the risk and potential of AWK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AWK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.