How does American Water Works make money?

American Water Works

Introduction

Revenue break-down

Revenue resources

State$Million % of Total revenue
New Jersey82624.40%
Pennsylvania77022.80%
Missouri34910.30%
Illinois34010.00%
California2687.90%

Revenue by type

Business performance and valuation

Business performance

Year 2021NextEra EnergyAmerican Water Works
Annual revenue and growth rate (million)17,069 -5.16%3,930 +4.05%
Annual operating income and growth rate (million)3,121 -39.35%1,274 -1.77%
Annual net income and growth rate (million)3,573 +22.4%1,263 +78.14%
Operating margin18.28%32.42%
Net margin20.93%32.14%

Stock valuation

7/23/2022NextEra EnergyAmerican Water Works
Market capitalization ($ billion)156.8727.03
Share price79.85148.71
P/E108.4020.01
Dividend yield2.13%1.76%
Stock performance in past 10 years (S&P 500 was+232%)+449%+232%

Long term investment metrics

Stock performance vs. S&P 500

CompanyMarket CapDividend YieldProjected Annualized EPS Growth Over Next 5 YearsStock’s 10-Year Total Return
NextEra Energy$139 billion2.4%8.9%449%
American Water Works$23.8 billion2%8.3%378%
S&P 500N/A1.47%N/A232%

Dividends

Among the best stocks to consider buying now are dividend-paying shares of well-established, profitable companies that sell products and services customers need during both good and challenging economic times, including during recessions. Two such companies are U.S. water and wastewater utility giant American Water Works (AWK 0.73%) 

American Water Works is the largest and most geographically diverse U.S. water and wastewater utility. It provides regulated utility services in 14 states and has a market-based business that provides services on military bases throughout the country.

The company was founded in 1886 and is poised to thrive well into the future. The beauty of regulated water utilities for investors is that they provide a product that is essential and has no substitutes, and they’re legal monopolies, so competition isn’t a concern.

American Water Works’ catalysts for growth include industry consolidation, the need for water system infrastructure upgrades throughout much of the country, and climate-change-induced rising temperatures.

The company has raised its dividend every year since it went public in 2008. Moreover, through 2026, management expects dividend growth to average at the high end of the 7% to 10% range.

American Water Works

Dollar-cost averaging is your friend

Dollar-cost averaging involves investing the same dollar amount at some set interval, such as monthly or quarterly. Dollar-cost averaging your way into your full position (or better yet, indefinitely, if possible) will prevent you from buying your entire stake in a stock right before a significant drop.

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