Water Investment Ideas

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American Water Works - >>> Bathe your portfolio with a boring and basic source of passive income


https://www.fool.com/investing/2022/03/27/theres-a-new-covid-variant-but-these-3-dividend-st/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article


Scott Levine (American Water Works): Feeling unsettled at learning that China is instituting lockdowns in various cities to stem the spread of the new COVID-19 variant? You're not alone. For millions of people, daily activities are resuming the feel they had prior to the pandemic's onset; however, the threat of a new COVID-19 variant can change that in a flash. And with it, market volatility would surely ensue. For those concerned about the prospect of wild market swings, fortifying their portfolios with a conservative dividend stock like American Water Works is a strong move to make.

Providing water and wastewater services to more than 14 million people in 24 states, American Water Works primarily operates in regulated markets. In each of the past three years, for example, the company has generated 86% of its operating revenue from its businesses in regulated markets. Operating in this way affords the company clear insight into future cash flows, allowing it to plan accordingly for acquisitions of smaller municipal-run water utilities as well as the replacement and upgrading of aging infrastructure.

Granted, the eyes of high-yield dividend seekers may not be lighting up when they see the 1.54% forward dividend yield that American Water Works' stock offers, but management's commitment to rewarding shareholders makes the stock worth wading into. From 2016 to 2021, management has raised the dividend at a 10% compound annual growth rate. Looking ahead, investors will find that management is expecting to grow the payout at a similar pace, projecting to increase the dividend at a 7% to 10% compound annual growth rate from 2022 to 2026.

Think these dividend raises are going to land the company in hot water? Think again. On American Water Works' Q3 2021 conference call, CEO and CFO Susan Hardwick stated that management is "narrowing our long-term payout target range to 55% to 60% which will allow us to fund our significant regulated investment plan, fund our dividend growth strategy, and maintain a healthy balance sheet."

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