Utility Expert's Water Trio

09/26/2014 8:00 am EST


David Dittman

Chief Investment Strategist, Australian Edge, Canadian Edge, & Utility Forecaster

Water, the most essential resource for human existence, is also a key component of a diversified portfolio of dividend-paying stocks, explains David Dittman, editor of Utility Forecaster.

The three water utilities we hold in the Growth Portfolio—American Water Works (AWK), Aqua America (WTR) and Connecticut Water Service (CTWS)—continue to execute on acquisition-led growth strategies, while consistent investment in system reliability also builds shareholder value.

American Water Works is pushing out to new all time highs after management reported that second-quarter operating revenue increased by 4.8% to $759.2 million.

Net income rose 7.9% to $109.3 million, or $0.61 per share. Adjusted net income—which excludes the impact of the Freedom Industries chemical spill in West Virginia—was $112.3 million, or $0.63 per share.

This was an increase of 8.6% compared to weather-normalized second-quarter 2013 earnings per share. Meanwhile, management guided toward the upper end of its 2014 EPS range of $2.35 to $2.45.

Aqua America boosted its quarterly dividend by 8.6%, as net income rose to $55.6 million, or $0.31 per share, from $53.6 million, or $0.30 per share, a year ago. Income from continuing operations increased to $54.8 million from $53 million in the second quarter of 2013.

Operating revenue was $195.3 million compared to $193.9 million for the same period in 2013, despite the impact of above-average rainfall on Aqua Pennsylvania, the company’s largest subsidiary.

Connecticut Water boosted its dividend by 4%, marking the 45th straight year of payout growth for the utility.

Management reported second-quarter net income of $7.5 million, or $0.69 per share, an increase of 74.4% due largely to the implementation of Connecticut’s Water Revenue Adjustment. 

The core Water Activities segment posted earnings of $7.1 million, or $0.65 per share. Revenue for the segment was up 12.7% to $25.8 million. Operating expenses decreased by 0.6% to $17.2 million due to a lower effective federal income tax rate.

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