Dividend Stocks

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>>> Essential Utilities : For many investors, market downturns like the one we are currently experiencing can be disconcerting, leading them to fortify their holdings by buying less-volatile stocks. During boon times, these conservative stocks are hardly stealing the spotlight from innovative market disruptors that represent ample growth potential, but it's times like these when less-sexy, conservative stocks like Essential Utilities -- which offers a 2.3% forward dividend yield -- take center stage. Providing water, wastewater, and natural gas services to 5 million customers in 10 states, Essential Utilities offers indispensable services that are in demand regardless of market conditions.

Because it operates in regulated markets, Essential Utilities doesn't have the luxury of arbitrarily raising prices when the mood strikes. In 2021, for example, 98% of the company's $1.9 billion in operating revenue came from the company's business in regulated water and natural gas markets. On the other hand, the company does have excellent foresight regarding future finances. Management, for example, projects growing its water assets (excluding acquisitions) at a compound annual growth rate (CAGR) of 6% to 7% from 2021 to 2024; similarly, it forecasts growing natural gas assets at an 8% to 10% CAGR during the same period. These projections, furthermore, lead management to believe that the company will grow its earnings per share at a 5% to 7% CAGR to 2024, from the $1.67 it reported in 2021.

Besides the EPS outlook, passive income aficionados will appreciate management's approach to dividend growth over the next few years. Essential Utilities aims to raise the dividend at a similar pace to the EPS growth -- similar to what the company has done in the past. From 2016 through 2021, the dividend grew at a CAGR of 7% while the company's EPS grew about 5%. And it's not as if management expects to place the company in hot water, in terms of its financial health, solely to placate investors. Management plans on keeping its payout ratio below 65% -- a welcome sight for investors on the lookout for conservative dividend stocks.

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