American States Water: An Undervalued Utility With A Long Dividend Growth History

American States Water Company (AWR), a regulated utility with a 71-year dividend growth streak, is highlighted as an undervalued long-term buy. Its current dividend yield of approximately 2.7% is near decade highs, supported by recent rate increases, a favorable regulatory environment, and consistent earnings growth. The company's strong dividend safety and conservative financials underpin its potential for continued revenue and dividend expansion.

Analysis

American States Water Company (AWR) is positioned as a regulated utility with a highly compelling history of capital returns, highlighted by an uninterrupted 71-year dividend growth streak, earning it the 'Dividend King' and 'Dividend Aristocrat' statuses. The current dividend yield of approximately 2.7% is significant as it trades near a ten-year high, supporting the argument that the stock is undervalued relative to its historical norms. Future growth is reportedly underpinned by approved rate increases, a favorable regulatory framework for its California water and electricity subsidiaries, and steady earnings growth. This core utility business is supplemented by contracted water and wastewater services for U.S. military bases, providing a diversified revenue stream. The company's financial profile is characterized by strong dividend safety and conservative management, which reinforces the outlook for continued revenue and dividend expansion. The author, who discloses a beneficial long position in the stock, concludes with a 'long-term buy' recommendation based on these factors.

Key Decisions for Investors

• Given the 71-year history of dividend growth and a yield near decade highs, income-focused investors may find AWR an attractive candidate for a core long-term holding.
• Investors should consider the stock's current valuation, described as undervalued relative to historical averages, as a potential entry point for exposure to a stable, regulated asset.
• It is prudent to monitor the regulatory environment in California and the execution on military base contracts, as these are the primary catalysts for the company's projected revenue and earnings growth.
• The author's disclosed long position in AWR should be noted, as it may contribute to the strongly bullish sentiment expressed in the analysis.