American Water Works Company, Inc. (NYSE: AWK), through its subsidiaries, provides water and wastewater services in the United States. It offers water and wastewater services to approximately 1,700 communities in 14 states serving approximately 3.5 million active customers. The company serves residential customers; commercial customers, including food and beverage providers, commercial property developers and proprietors, and energy suppliers; fire service and private fire customers; industrial customers, such as large-scale manufacturers, mining, and production operations; public authorities comprising government buildings and other public sector facilities, such as schools and universities; and other utilities and community water and wastewater systems. It also provides water and wastewater services on military installations; and undertakes contracts with municipal customers, primarily to operate and manage water and wastewater facilities, as well as offers other related services. In addition, the company operates approximately 80 surface water treatment plants; 540 groundwater treatment plants; 175 wastewater treatment plants; 53,700 miles of transmission, distribution, and collection mains and pipes; 1,200 groundwater wells; 1,700 water and wastewater pumping stations; 1,100 treated water storage facilities; and 74 dams. The company was founded in 1886 and is headquartered in Camden, New Jersey.
Company Overview
- Market Cap: 27.09 Billion
- PE Ratio: 28.15
- EPS: 4.94
- Dividend Yield: 2.20%
American Water Works is the largest publicly traded water and wastewater utility in the U.S. It makes most of its money by providing regulated water and wastewater services to retail, commercial, and industrial customers. The rest of its earnings come from less-predictable market-based activities, including providing water-related services to homeowners and the military.
American Water Works expects to grow its earnings per share (EPS) at a 7% to 9% compound annual rate through 2027, making it one of the fastest-growing utilities in the country. Driving that outlook is its plan to invest $14 billion to $15 billion to expand its regulated water utility operations through capital investments and acquisitions.
The water utility has the financial flexibility to support its expansion plan, thanks to its top-tier financial profile. It has an investment-grade credit rating, giving it the ability to borrow money at lower rates. Meanwhile, it has a very conservative dividend payout ratio (it has targeted an average between 50% to 60% of its adjusted EPS). The strong financial profile has American Water Works forecasting dividend growth of 7% to 9% annually through 2027. That would enable the utility to continue its dividend growth streak, which hit 14 straight years in 2022. Therefore, AWK is the best utility stock to own for long-term investments.