Dividend Kings In Focus: American States Water – Sure Dividend

Up to date on July seventh, 2025 by Felix Martinez

American States Water (AWR) has a powerful monitor file of paying dividends to shareholders.

AWR is a part of the Dividend Kings, a bunch of shares which have raised their payouts for no less than 50 consecutive years. You may see all 55 Dividend Kings right here.

And, you may obtain the complete record of Dividend Kings, plus necessary monetary metrics akin to dividend yields and price-to-earnings ratios, by clicking on the hyperlink under:

Dividend Kings are the “better of the most effective” in terms of rewarding shareholders with money, and this text will talk about AWR’s dividend, in addition to its valuation and outlook.

AWR has raised its dividend for 70 consecutive years, incomes it the longest dividend progress streak within the inventory market. No different firm encompasses a longer dividend progress streak than AWR. For context, the second-longest dividend progress streak belongs to Dover Company, which has maintained 69 consecutive years of annual dividend will increase.

This text will talk about the the explanation why American States Water has maintained such a protracted historical past of regular dividend will increase.

Enterprise Overview

AWR is primarily a regulated water utility enterprise that serves ~263,000 prospects in California. It additionally operates a regulated electrical utility enterprise in California and a non-regulated enterprise, offering providers for water distribution and wastewater assortment on 11 navy bases within the U.S.

Associated: The 7 Finest Water Shares To Purchase Now

The regulated water utility enterprise is by far an important division, accounting for ~70% of the corporate’s whole revenues.

Supply: Investor Presentation

Whereas the regulated water enterprise generates most of AWR’s revenues, the non-regulated enterprise, which offers providers to water and wastewater techniques on navy bases, can also be important. AWR has signed 50-year contracts with the navy bases, thus securing a dependable and recurring stream of revenues.

Utility shares are slow-growth corporations. They spend monumental quantities on increasing and sustaining their infrastructure, accumulating excessive debt hundreds.

Because of this, they depend on regulatory authorities to approve fee hikes yearly. These fee hikes goal to assist utilities service their debt, however they often lead to modest income and earnings progress.

Authorities have incentives to supply enticing fee hikes to utilities, encouraging them to proceed investing closely in infrastructure. Alternatively, authorities attempt to maintain shoppers glad, so that they often provide restricted fee hikes.

AWR is a vivid exception to the rule of sluggish progress within the utility sector. Prior to now decade, the corporate has grown its earnings per share at a median annual fee of 6.7% over the previous 15 years.

AWR achieved a superior progress tempo primarily because of the fabric fee hikes it has obtained from regulatory authorities and its progress in its non-regulated enterprise. General, it has a much less “boring” enterprise mannequin than a typical utility firm.

Development Prospects

As talked about, utilities are typically slow-growth shares because of the lackluster fee hikes they obtain from regulatory authorities in change for his or her hefty capital bills. AWR is superior to most utilities on this facet, because it has loved an distinctive 10.3% common annual fee hike in its regulated water enterprise in recent times.

Supply: Investor Presentation

This has enabled the corporate to develop its earnings per share at a 7.8% common annual fee over the past decade, one of many highest progress charges within the utility sector.

Furthermore, because of its optimistic efficiency, resilience to macroeconomic headwinds, and vivid outlook, AWR raised its dividend by 8.3% this 12 months. That is above the everyday dividend progress fee of utility shares.

AWR has now grown its dividend for 70 consecutive years. The corporate’s 10-year dividend per share CAGR stands at a powerful 8.0%.

It is usually exceptional that administration has set a objective of elevating the dividend by greater than 7% per 12 months on common over the long run.

Supply: Investor Presentation

Such a excessive dividend progress fee is uncommon within the slow-growth utility sector, making the inventory’s 2.4% dividend yield considerably extra enticing.

Furthermore, AWR has a markedly sturdy steadiness sheet and an A+ credit standing, one of many highest within the utility trade.

Due to its wholesome payout ratio of ~59%, sturdy steadiness sheet, and sustained progress, AWR has a very good likelihood of delivering its bold objective of greater than 7% annual dividend progress to its shareholders.

Going ahead, AWR is more likely to proceed rising at a significant tempo because of fee hikes in its water utility enterprise. Moreover, because of the extremely fragmented nature of the water utility enterprise, AWR can even develop by buying smaller corporations.

Aggressive Benefits & Recession Efficiency

Utilities make investments extreme quantities in sustaining and increasing their networks. These investments lead to excessive debt, however additionally they kind impenetrable limitations to entry for potential opponents.

It’s basically unimaginable for brand new opponents to enter the utility markets during which AWR operates.

Even in its non-regulated enterprise, AWR enjoys weak competitors because of the 50-year period of its contracts.

As well as, whereas most corporations undergo throughout recessions, utilities are among the many most resilient corporations throughout such intervals, as financial downturns don’t have an effect on water and electrical energy consumption.

The resilience of AWR was significantly evident through the Nice Recession. Its earnings-per-share through the Nice Recession are as follows:

• 2007 earnings-per-share of $1.56
• 2008 earnings-per-share of $1.49 (4% lower)
• 2009 earnings-per-share of $1.61 (8% enhance)
• 2010 earnings-per-share of $1.66 (3% enhance)

Due to this fact, AWR remained resilient through the Nice Recession, managing to develop its earnings per share by 6% between 2007 and 2010.

AWR’s resilience was additionally evident in 2020, as the corporate nonetheless managed to develop earnings per share regardless of the deep financial downturn attributable to the coronavirus pandemic.

AWR is without doubt one of the most resilient corporations throughout recessions and bear markets. This resilience is essential, because it helps the inventory’s long-term returns and makes it simpler for shareholders to carry onto the inventory throughout broad market sell-offs.

Valuation & Anticipated Returns

We anticipate AWR to generate earnings per share of $3.29 this 12 months. Because of this, the inventory is at the moment buying and selling at a price-to-earnings ratio of 23.2. We contemplate 20.0 to be a good earnings a number of for this inventory.

The comparatively excessive price-to-earnings ratio, which has been sustained through the years, could be attributed, no less than partially, to the depressed rates of interest of the previous decade.

When rates of interest are low, income-oriented traders face a problem in figuring out enticing yields out there. Thus, they view the dividend yields of utilities as extra enticing. Because of this, utility inventory costs profit from suppressed rates of interest.

Surprisingly, even with rates of interest now on the rise, AWR has retained a steep valuation premium. We consider this is because of traders flocking to the corporate’s recession-proof money flows, predictable progress avenues, and glorious monitor file of making shareholder worth, which the corporate has constantly demonstrated even through the harshest market environments.

Nonetheless, no one can assure this may stay the case indefinitely. The inventory might simply be priced decrease if traders come to appreciate that it trades at an extreme valuation a number of. Due to this fact, we see the potential for the P/E a number of to contract shifting ahead.

If AWR reaches our assumed honest price-to-earnings ratio of 20.0 over the following 5 years, its earnings a number of will contract, leading to a 3.5% discount in its annual returns.

Furthermore, AWR is at the moment providing a dividend yield of two.4%. We additionally anticipate the corporate to develop its earnings per share at a 5.3% common annual fee over the following 5 years.

Placing all of it collectively, AWR is more likely to obtain annual returns of 4.2% by means of 2030.

Closing Ideas

AWR is way more fascinating than the typical utility inventory, because it has some distinctive traits.

Over the past decade, it has grown its earnings per share at a excessive single-digit annual fee. That is a lot better than the low progress charges of most utilities.

Moreover, AWR’s enterprise features a non-regulated section that gives recurring income for 50 years and affords important progress potential.

Nonetheless, because of the market’s excessive software of all AWR’s virtues, shares may very well be overvalued at their present ranges. With a average five-year anticipated whole return potential, AWR inventory receives a “maintain” score.

Extra Studying

The next databases of shares comprise shares with very lengthy dividend or company histories, ripe for choice for dividend progress traders.