Aqua America: A Top "DRIP" in Water

08/03/2017 2:56 am EST

Focus: UTILITIES

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, asserts Jimmy Mengel, dividend expert and editor of The Crow's Nest.


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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.

Simply put, you must have some utility exposure in your portfolio — particularly for those who follow our advice to invest long-term through dividend reinvestment plans (DRIPs).

Water is a great place to start. The U.S. uses 346,000 million gallons of fresh water every day. Each person uses a whopping 80 to 100 gallons of water per day — mostly through the use of toilets.

Aqua America (WTR) has always been one of my favorite DRIP positions. Early Crow’s Nesters are up 54% since I first recommended it — and that’s without counting the 5% discount if you buy the stock directly from the company.

Since Aqua America provides water and wastewater services in the U.S., we think it makes a great addition to a long-term diversified portfolio.

Aqua America is also constantly growing, with over 300 acquisitions in two decades. Aqua America operates more than 1,400 public water systems and 187 wastewater treatment plants and collection systems. Together these systems serve nearly 3 million people across eight states.

While utilities are often seen as simply a defensive pick, they can give you some serious returns, especially if you are reinvesting those healthy dividends.

But I don’t look for huge splashes with plays like this. Water is going to keep running, people will continue to pay their water bills before almost any other bill and companies like Aqua America will keep on providing shareholders with income and growth.

Aqua America has paid consecutive quarterly cash dividends for 72 years and has increased the dividend 26 times in the last 25 years. It currently yields 2.27%.

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