Reasons to Add American Water Works (AWK) to Your Portfolio

Core Viewpoint - American Water Works Company Inc. (AWK) is positioned as a strong investment option in the utility sector due to its planned capital investments, growth prospects, and strong return on equity (ROE) [1] Growth Projections - The Zacks Consensus Estimate for AWK's 2024 EPS has increased by 0.96% to $5.22 per share over the past 60 days [2] - The estimated 2024 revenues are projected at $4.27 billion, reflecting a year-over-year increase of 0.82% [2] - The company's earnings growth rate over the next three to five years is estimated at 8% [2] Return on Equity - AWK's current ROE stands at 9.7%, which is slightly higher than the industry average of 9.66%, indicating effective utilization of funds [3] Debt Position - The times interest earned (TIE) ratio for AWK at the end of Q4 2023 was 3.6, suggesting the company can comfortably meet its interest obligations [4] - AWK's total debt to capital ratio is 55.81%, which is better than the sector average of 60.32% [4] Dividend History - AWK has a quarterly dividend of 70.75 cents per share, leading to an annualized dividend of $2.83 per share [5] - The company anticipates a long-term dividend growth of 7-9%, with a current dividend yield of 2.39%, outperforming the S&P 500 composite's yield of 1.3% [5] Systematic Investments - AWK plans to invest $3.1 billion in 2024 to enhance its water and wastewater infrastructure, primarily for improvements in Regulated Businesses [6] - The company aims for total investments of $16-$17 billion from 2024 to 2028 and $34-$38 billion from 2024 to 2033 [6] Price Performance - Over the past month, AWK's stock has decreased by 0.3%, while the sector has seen a decline of 5.8% [7] Other Stocks to Consider - Other top-ranked stocks in the same industry include American States Water (AWR), Primo Water (PRMW), and Consolidated Water (CWCO), all currently holding a Zacks Rank 2 [9] - AWR has a long-term earnings growth rate of 6.3% and an average earnings surprise of 3.12% over the last four quarters [9] - PRMW's long-term earnings growth rate is 12.9%, with a 2024 EPS estimate of 88 cents, indicating a year-over-year improvement of 41.94% [9] - CWCO has a long-term earnings growth rate of 8% and an average earnings surprise of 61.56% over the last four quarters [9]