3/8/25
Essential Utilities, Inc. (NYSE: WTRG) is one of the major regulated water and natural gas utility companies in the U.S., providing essential services to millions of customers. The company operates in a sector known for its stability, making it an appealing choice for income-focused investors.
Utilities are often favored by dividend investors because of their predictable revenue streams and commitment to shareholder returns. WTRG fits that mold, offering a reliable dividend yield and a long history of payouts. With a market cap hovering around $10.94 billion and a forward dividend yield of 3.27%, it’s worth taking a closer look at whether this stock is a strong long-term investment for those focused on passive income.
Key Dividend Metrics
💰 Dividend Yield: 3.27% (higher than its five-year average of 2.61%)
📈 Five-Year Dividend Growth Rate: 7.0% (steady, not spectacular, but reliable)
📆 Payout Ratio: 58.3% (a sustainable level for a utility company)
📅 Next Dividend Date: June 2, 2025 (ex-dividend date is May 13, 2025)
🔄 Dividend History: Over 30 years of uninterrupted payments
Dividend Overview
Dividend reliability is one of the biggest selling points for Essential Utilities. The company’s current yield of 3.27% is slightly above its historical average, which could indicate a good entry point for investors looking to lock in a higher yield.
The payout ratio sits at a manageable 58.3%. That means WTRG is distributing just over half of its earnings as dividends, leaving room for reinvestment and future increases. For a utility stock, this is a comfortable range—high enough to be attractive but not so high that it raises concerns about sustainability.
Dividend Growth and Safety
Steady and predictable—that’s how WTRG’s dividend history can best be described. Over the past five years, dividends have grown at an annualized rate of around 7%. This isn’t aggressive, but it reflects a commitment to increasing payouts at a sustainable pace.
One of the advantages of investing in utilities is the consistency of their cash flow. Since these companies provide essential services, their revenue remains stable regardless of economic conditions. That makes dividend cuts unlikely unless the company faces a significant financial issue.
While WTRG’s payout ratio is in a safe zone, the company’s high debt load is something to keep an eye on. Utilities often carry large amounts of debt to fund infrastructure projects, but too much leverage can become a concern if interest rates rise.
Chart Analysis
Price Action
Essential Utilities (WTRG) has been in a strong upward move recently, closing at $39.81 on March 7, 2025. The stock opened at $38.49, dipped slightly to $38.25, and hit a high of $40.10 before settling near the top of its daily range. That kind of price action suggests strong buying interest throughout the session.
Looking at the bigger picture, WTRG experienced a decline late last year, dipping to a low near $33.18 before finding a bottom and reversing higher. The latest rally has brought the price back above the 50-day moving average (SMA) and closer to the 200-day SMA, which could be a key level to watch.
Moving Averages
The 50-day SMA is now turning upward, a positive sign indicating short-term momentum is shifting. However, the 200-day SMA is still relatively flat to slightly declining, reflecting the longer-term trend, which has been weaker.
The fact that WTRG has reclaimed the 50-day SMA is encouraging, as this level had been acting as resistance in previous months. If the stock can sustain above this area, it may gain further upside momentum. A test of the 200-day SMA, currently sitting around $38.12, could be the next technical hurdle.
Volume Trends
Volume for the day came in at 2.08 million shares, which is close to the average, suggesting this latest rally isn’t just a one-off spike but could have some staying power. There were a few days over the past several months where volume spiked significantly, particularly in late December and again in early March, likely indicating institutional buying at those levels.
If volume continues to pick up on days when the stock moves higher, that would add further conviction to the rally. On the other hand, if volume dries up as the price approaches resistance, it could indicate a lack of follow-through from buyers.
Relative Strength Index (RSI)
The RSI indicator is approaching the 70 level, which suggests the stock is getting closer to overbought territory. This doesn’t necessarily mean a pullback is imminent, but it does signal that WTRG has been gaining strength quickly.
If RSI moves above 70 and stays elevated, it could indicate strong bullish momentum. However, if RSI rolls over from here, it could mean the stock needs to consolidate before making another push higher.
Support and Resistance
Support appears to be forming near the $37.50 – $38.00 zone, where the 50-day SMA is currently sitting. This level could act as a cushion if the stock pulls back.
On the upside, immediate resistance is near $40.00 – $40.50, which is where the stock peaked during the session. A break above this area could open the door for a move toward $41.78, the 52-week high.
If WTRG fails to hold above its recent breakout level and falls back below $38.00, it could indicate the rally is losing steam, and the stock may need to retest lower support levels.
Analyst Ratings
Upgrades
📈 On January 28, 2025, Jefferies Financial Group upgraded Essential Utilities from Hold to Buy, setting a price target of $41. The upgrade was driven by the company’s strong financial performance and stable position in the utilities sector. Analysts pointed to improving cash flow and cost efficiencies as signs of potential stock appreciation.
🚀 Just a few weeks later, on March 5, 2025, Evercore ISI raised its price target for Essential Utilities from $45 to $46, maintaining an Outperform rating. The firm cited consistent earnings growth and sound management strategies as reasons for the adjustment. Analysts also emphasized the company’s ability to navigate rising infrastructure costs while maintaining profitability.
Downgrades
📉 On January 7, 2025, Wells Fargo & Company downgraded Essential Utilities from Overweight to Equal Weight, adjusting the price target from $39 to $41. Concerns over the company’s high debt levels played a significant role in the downgrade. Analysts noted that while the business remains fundamentally strong, increased regulatory scrutiny could impact long-term growth.
⚠️ Some analysts have also expressed caution regarding the broader utility sector. With interest rate uncertainty in play, defensive stocks like utilities may face headwinds if borrowing costs remain elevated. This has led some firms to take a more neutral stance on WTRG despite its steady fundamentals.
Consensus Price Target
📊 The latest consensus price target for Essential Utilities stands at $43.50, reflecting a potential upside of approximately 9.26% from the current stock price of $39.81. Analysts seem divided between those seeing strong long-term value and those remaining cautious due to debt concerns and regulatory risks. While some upgrades highlight earnings stability, others see limited near-term catalysts for significant stock appreciation.
Earnings Report Summary
Essential Utilities, Inc. (NYSE: WTRG) wrapped up 2024 with solid financial results, showing steady growth and a strong commitment to expanding its operations. The latest earnings report highlighted both strengths and challenges, giving investors a clearer picture of where the company is headed.
Fourth Quarter Performance
The company closed out the fourth quarter with $184.8 million in net income, translating to earnings per share (EPS) of $0.67. That’s a nice jump from the previous year’s fourth quarter, when EPS came in at $0.50. The boost was largely driven by operational improvements and a steady increase in customer demand.
Full-Year Results
Looking at the full year, Essential Utilities pulled in $595.3 million in net income, with an EPS of $2.17. That’s a healthy increase from last year and aligns with expectations. Stripping out one-time adjustments, adjusted EPS landed at $1.97, which fits right into the company’s target range of $1.96 to $2.00. This kind of steady growth is exactly what long-term investors like to see.
Revenue Breakdown
Total revenue for 2024 came in at $2.09 billion, a slight but steady increase from the prior year. The water segment was the real standout, bringing in $1.22 billion, up nearly 6% thanks to new rate adjustments and customer growth. On the other hand, the natural gas segment saw a small dip, with revenue slipping from $863.8 million to $843.0 million. A drop in consumption was the main culprit, though rate increases helped offset some of the losses.
Investments and Cost Management
Essential Utilities has been pouring money into infrastructure improvements, with around $1.3 billion invested in 2024 alone. Some of that cash went toward upgrading water treatment facilities and addressing PFAS contamination at multiple sites. Operating expenses rose slightly, but the company has done a good job keeping costs under control despite inflation.
Regulatory Wins
One of the biggest developments was the approval of a rate case settlement in Pennsylvania, which will bring in an additional $73 million in annual revenue starting in early 2025. Since Pennsylvania makes up the bulk of the company’s business, this was an important win that adds stability to future earnings.
Looking Ahead
The company has big plans for the next few years, with $8 billion in infrastructure investments lined up through 2029. They’re also targeting annual earnings growth of 5-7%, which, if achieved, would keep them on track as a strong dividend-paying utility. To help fund these projects, management expects to raise $315 million in equity in 2025.
Overall, the company is moving in the right direction, balancing smart investments with steady financial performance. Investors looking for stability in the utility sector will likely keep a close eye on how these plans unfold in the coming years.
Financial Health and Stability
Looking at the broader financial picture, Essential Utilities has reported solid growth numbers. Revenue over the past year reached $2.09 billion, with a profit margin of 28.5%. These figures indicate a well-run company generating healthy profits.
Revenue growth of 26.1% year-over-year is particularly impressive for a regulated business. Strong earnings growth of 36.4% further supports the company’s ability to continue funding its dividend program.
One area of concern is debt. The company carries $7.78 billion in total debt, giving it a debt-to-equity ratio of 125.5%. That’s on the higher side, even for a utility. The company’s ability to manage this debt efficiently will play a big role in determining whether it can continue raising dividends at its current pace.
The current ratio, a measure of short-term financial health, is at 0.50. This suggests that the company has more short-term liabilities than liquid assets, but this is fairly common for utilities, which rely on stable cash flows rather than large cash reserves.
Valuation and Stock Performance
At its recent price of $39.81, WTRG is trading near the middle of its 52-week range ($33.18 – $41.78). The stock has been relatively stable but hasn’t delivered much in terms of price appreciation.
Its price-to-earnings (P/E) ratio stands at 18.35, which is reasonable for a utility. The forward P/E of 19.01 suggests that earnings growth is expected to continue but at a moderate pace.
The stock’s PEG ratio of 2.86 indicates that it’s not a screaming bargain, but for a steady dividend-paying utility, valuation is less about rapid growth and more about stability.
One positive sign is that WTRG is trading above its 50-day moving average of $35.93 but below its 200-day moving average of $38.12. That suggests some recent strength, though it’s still underperforming compared to broader market indices.
Risks and Considerations
Every stock comes with risks, and WTRG is no exception. While its dividend and business model are stable, there are a few areas that investors should watch closely.
🔺 High Debt Load – A debt-to-equity ratio of 125.5% means the company is heavily leveraged. This is common for utilities but still something to monitor, especially if interest rates increase.
⚡ Regulatory Environment – Utility companies operate under strict regulations that can impact profitability. Any unfavorable rate changes could put pressure on revenue.
🏗️ Capital-Intensive Business – Maintaining and expanding infrastructure requires significant investment, which can limit dividend growth.
📉 Stock Performance – While dividends remain strong, the stock itself has been relatively flat. Investors looking for capital appreciation may find better opportunities elsewhere.
One bright spot is the stock’s low beta of 0.79, which means it’s less volatile than the overall market. That makes it an appealing choice for investors looking for stability.
Final Thoughts
Essential Utilities is exactly what you’d expect from a regulated utility—dependable, steady, and built for income-focused investors. Its 3.27% yield, long history of dividend payments, and predictable revenue streams make it a solid choice for those looking for passive income.
The biggest downside? Debt levels are high, and the stock itself hasn’t delivered much in terms of price appreciation. But for investors who prioritize dividends over growth, WTRG remains a reliable holding in a portfolio focused on stability.
With a reasonable payout ratio and steady dividend growth, this is the kind of stock that won’t make headlines but will quietly generate income year after year.
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