Water Investment Ideas

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American Water Works (AWK) - >>> American Water Works may be one of the best examples of how boring stocks can quietly crush the market. Founded in 1886, the water utility went public at $21.50 a share in 2008 and was hovering around $160 a share in March 2022.

American Water Works is the country's largest water utility stock. Like other utilities, it benefits from being a regulated monopoly, meaning that the company doesn't face competition in the regions where it operates. In exchange, its prices are regulated by state and local governments.

Over the years, American Water Works has grown by investing in its own infrastructure through acquisitions and by seizing opportunities in market-based businesses such as its military services group.

The company plans to continue investing in the business and is forecasting between $22 billion and $25 billion in capital expenditures this decade to drive additional growth. It also completed 23 acquisitions in 2021.

American Water Works' earnings multiple has expanded considerably as the company has benefited from lower interest rates. This has caused investors to rotate from bonds into dividend stocks and lifted stock market multiples more generally, although that could reverse as interest rates rise.

While it's worth keeping an eye on interest rates, the company's size gives it an advantage in scalability and in making acquisitions. It pays a quarterly dividend of $2.41, or a 1.5% yield, as of March 2022.

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