H2O America (HTO), formerly known as SJW Group, is a water utility company that produces, purchases, stores, purifies, and distributes water to consumers and businesses in several states. The company also operates a small real estate division and generates nearly $900 million in annual revenue, advises Ben Reynolds, editor of Sure Dividend.
On Jan. 26, H2O America increased its quarterly dividend by 4.8% to $0.44 per share, extending its dividend growth streak to 58 consecutive years.
On April 28, the company reported first-quarter results for the period ending March 31. Revenue increased 3.7% to $183.2 million, topping expectations by $6.9 million. Earnings per share of $0.50 matched the prior year’s result and came in a penny ahead of estimates. Growth was driven by higher approved rates and increased customer usage, partially offset by rising production costs.
H2O America reaffirmed its 2026 guidance, calling for earnings per share of $3.08 to $3.18. At the midpoint, that would represent growth of 7.2% from 2025. Management continues to expect annual EPS growth of 6% to 8% through 2030.
A key advantage for H2O America is its presence in Silicon Valley and Central Texas, two regions that have experienced strong population growth. The company is also strengthening its Texas footprint through the addition of Quadvest. Growing populations require significant water infrastructure investment, supporting future rate increases and revenue growth.
Earnings growth has accelerated in recent years, improving from a 10-year compound annual growth rate of 1.4% to 9% over the last five years. We forecast earnings growth of 8% annually through 2031, with dividend growth of roughly 6% per year.
Shares currently trade at 17.9 times expected earnings, below our fair value estimate of 26 times earnings. Combined with expected earnings growth and the stock’s 3.1% dividend yield, we see the potential for annual total returns of 18.2%.
Recommended Action: Buy HTO.
