Yahoo Finance Reasons to Add American Water Works (AWK) to Your Portfolio Now
American Water Works Company Inc.’s AWK long-term investment plans in infrastructure should allow it to provide quality services to its expanding customer base. The company continues to expand operations through organic and inorganic initiatives. Given its growth opportunities, AWK makes for a solid investment option in the utility sector.
Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a strong investment pick at the moment.
Growth Projections & Surprise History
The Zacks Consensus Estimate for 2024 earnings per share (EPS) has moved up 1% in the past 90 days to $5.22.
The Zacks Consensus Estimate for 2024 revenues is pinned at $4.27 billion, implying an increase of 0.8% from the year-ago level.
AWK’s long-term (three-to-five years) earnings growth rate is 8%. The company delivered an average earnings surprise of 6% in the last four quarters.
Dividend History
American Water Works has consistently increased shareholders' value by paying dividends. Currently, its quarterly dividend is 70.75 cents per share, resulting in an annualized payout of $2.83 per share. The company expects its dividend per share to increase 7-9% over the long term. AWK’s current dividend yield is 2.45%, better than the Zacks S&P 500 Composite’s 1.62%.
Solvency
The time-to-interest earned ratio at the end of fourth-quarter 2023 was 3.6. The ratio, being greater than one, reflects American Water Works’ ability to meet future interest obligations without difficulties.
Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing the funds to generate higher returns. Currently, American Water Works’ ROE is 9.7%, higher than the sector’s average of 8.68%. This indicates that the company has been utilizing funds more constructively than its peers in the utility sector.
Systematic Investments
American Water Works plans to invest $3.1 billion in 2024 to strengthen and expand its water and wastewater infrastructure, with a major portion utilized for infrastructure improvements in Regulated Businesses. Over the long term, it aims to invest in the range of $16-$17 billion in 2024-2028 and in the $34-$38 billion band during 2024-2033.
These systematic investments will extend and strengthen AWK's infrastructure, assisting it in catering to the rising demand from its expanding customer base and, in turn, generating more revenues for the company.
Price Performance
In the past month, the stock fell 0.6% compared with the industry’s 0.7% decline.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked stocks in the same industry are The York Water Company YORW, American States Water AWR and Global Water Resources GWRS, each carrying a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The York Water, American States Water and Global Water Resources recorded a trailing four-quarter average earnings surprise of 8.6%, 3.1% and 28.8%, respectively.
The Zacks Consensus Estimate for YORW, AWR and GWRS’ first-quarter 2024 EPS implies growth of 11.5%, 9.3% and 33.3%, respectively, from the year-earlier levels.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
The York Water Company (YORW) : Free Stock Analysis Report
American Water Works Company, Inc. (AWK) : Free Stock Analysis Report
American States Water Company (AWR) : Free Stock Analysis Report
Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report
