5 Water Utilities Stocks with Flowing Dividends

Joel Anderson  |

There is no more essential resource to human existence, aside from air, than water. However, while no one has figured out how to make money from supplying people with air (yet!), there are several water utilities that provide America with the water used for cooking, cleaning, and, depending on one's feelings about bottled water, drinking. Like most utilities, water companies have the benefit of a set demand for their product that is almost assured to rise. As populations grow, water concerns should grow with them, and those companies providing water can rely on continuing to bring in profits. Unfortunately, these companies also have a limited ceiling, but they do provide a relatively low-risk investment opportunity.

There are a total of five water utilities in the United States that have a market cap exceeding $300 million. Of these, all five offer a dividend yield at or just under about 3 percent, and all five have relatively high levels of debt compared to companies outside the sector. The debt, which would normally be a greater concern, is actually fairly typical for utilities which can use future earnings to secure loans due to their relative stability. Operating in regulated markets with consistent demand, water utilities can finance growth with relatively high levels of debt without running quite the same risks that companies in other sectors would. However, that doesn't mean high debt levels should be completely ignored when considering an investment in a water utility.

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California Water Service Group (CWT)

Market Cap: $763.58 million   Debt/Equity Ratio: 1.19   Dividend Yield: 3.45 percent

California Water Service Group owns six subsidiaries and provides water services to the West Coast, New Mexico, and Hawaii through them. Three are publicly regulated utilities. California Water provides water services for uses ranging from consumer consumption to irrigation to fire prevention.

American States Water Co (AWR)

Market Cap: $695.64 million   Debt/Equity Ratio: 0.85   Dividend Yield: 3.02 percent

Incorporated in 1998, American States Water Co is the parent company to three utilities and also provides electricity services to some clients. American States Water Co primarily serves clients in the American Southwest, with facilities in California, Arizona, and Texas.

Aqua America, Inc (WTR)

Market Cap: $3.06 billion   Debt/Equity Ratio: 1.27   Dividend Yield: 3.00 percent

Aqua America is a holding company that operates in water utilities in Pennsylvania, Texas, North Carolina, Ohio, Illinois, New Jersey, New York, Florida, Indiana, Virginia, Maine, Missouri, and Georgia. As of 2010, more than half of Aqua America's revenue could be traced to Aqua Pennsylvania, it's largest operating subsidiary.

SJW Corp. (SJW)

Market Cap: $447.33 million   Debt/Equity Ratio: 1.31   Dividend Yield: 2.95 percent

Through its four subsidiaries, SJW provides water services to over 1 million customers in the San Jose, CA area. It also owns undeveloped land in Tennessee and California as well as commercial buildings in several states.

American Water Works Co., Inc. (AWK)

Market Cap: $5.95 billion   Debt/Equity Ratio: 1.39   Dividend Yield: 2.72 percent

American Water, the biggest water utility in the country, provides water services for 15 million people in over 30 US states and two Canadian provinces.

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