Aqua America: For Steady Income

01/29/2015 7:00 am EST


Jimmy Mengel

Editor, Outsider Club

Utilities, by and large, are profitable in good times and bad; even in a recession, people are going to pay their water bills before buying pretty much anything else, observes Jimmy Mengel, editor of The Crow's Nest.

Add to that the regulated nature of utilities—where the government basically lets them act as monopolies—and you have a steady place to generate income rather safely.

The utilities sector quietly returned one of the best performances of the past year, returning 30% as the S&P (SPX) returned a measly 8% or so.

All the while, the utilities sector didn’t whipsaw around, it steadily kept sending money to investors. But in the face of market volatility, that’s a good thing.

That’s why we have Aqua America (WTR) in our portfolio. It is one of the largest publicly traded water utilities in the United States. It serves over three million people in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Indiana, Virginia, Florida, and Georgia.

Combine that immediate 2.5% yield with the safety of a utility stock, and the consistent dividend payments, and I call Aqua America a no-brainer for a long-term retirement account or simply a safe place to collect steady income checks.

Aqua America also holds a track record of consistently sharing profits with its shareholders through dividend payments. In the first nine months of 2014, Aqua America paid dividends worth $83 million compared with $76 million in the year-ago period.

We think it makes a great addition to a long-term diversified portfolio. What I really like about it is the fact that it offers a 5% discount if you buy its stock through its dividend reinvestment program.

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