Reasons to Add American States Water (AWR) to Your Portfolio Now
American States Water’s AWR strategic investments in infrastructure upgrades will allow it to provide quality services to its expanding customer base. Given its growth opportunities, AWR makes for a solid investment option in the utility sector.
Let’s focus on the factors that make this Zacks Rank #2 (Buy) stock a strong investment option at the moment.
Growth Projections
The Zacks Consensus Estimate for AWR’s 2023 earnings per share (EPS) has moved north 0.7% to $2.98 in the past 60 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pinned at $603 million, implying a year-over-year increase of 22.7%.
AWR’s long-term (three to five years) earnings growth rate is 6.3%.
Return on Equity
Return on equity (ROE) indicates how efficiently a company has been utilizing the funds to generate higher returns. Currently, American States Water’s ROE is 13.6%, higher than the industry’s average of 9.58%. This indicates that the company has been utilizing the funds more constructively than its peers in the utility water supply industry.
Debt Position
At the end of third-quarter 2023, AWR’s total debt to capital was 52.41%, much better than the sector’s average of 58.48%.
The time to interest earned ratio at the end of third-quarter 2023 was 5.1. The ratio, being greater than one, reflects the company’s ability to meet future interest obligations without difficulties.
Dividend History
American States Water has been a steady dividend payer. It has paid dividends to shareholders every year since 1931. AWR’s objective is to hike its dividend rate and witness a CAGR of more than 7% over the long term.
In October 2023, the board of directors declared a quarterly dividend of 43 cents per share, which resulted in an annualized dividend of $1.72 per share. The company’s current dividend yield is 2.04%, better than the Zacks S&P 500 Composite’s yield of 1.41%.
Systematic Investments
Strategic capital investments are making AWR’s infrastructure stronger and more resilient. The regulated utilities invested $167.4 million in company-funded capital projects in 2022 and expect capital expenditures in the range of $140-$160 million for 2023. These systematic investments drove the rate base from $752.2 million in 2018 to $1,152.3 million in 2022.
Price Performance
In the past three months, the stock has returned 0.6% against the industry’s 36.3% decline.
Image Source: Zacks Investment Research
Other Stocks to Consider
A few other top-ranked stocks from the same industry are Global Water Resources GWRS, The York Water Company YORW and Consolidated Water Co. Ltd. CWCO, each holding a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GWRS’ long-term earnings growth rate is 15%. The company delivered an average earnings surprise of 27.1% in the last four quarters.
The Zacks Consensus Estimate for YORW’s 2023 EPS is pegged at $1.59, implying a year-over-year improvement of 13.6%. The company delivered an average earnings surprise of 6.7% in the last four quarters.
CWCO’s long-term earnings growth rate is 8%. The company delivered an average earnings surprise of 61.6% in the last four quarters.
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The York Water Company (YORW) : Free Stock Analysis Report
American States Water Company (AWR) : Free Stock Analysis Report
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report