Updated 3/5/25
American Water Works Company, Inc. (NYSE: AWK) is the largest publicly traded water and wastewater utility in the U.S., serving millions of customers across multiple states. It operates in a highly regulated industry, which gives it a stable and predictable revenue stream—exactly what dividend investors like to see.
While water utilities might not be as exciting as high-growth tech stocks, they offer something even more valuable: consistency. AWK has built a reputation as a steady performer, with a long history of dividend payments and growth. For investors focused on generating income, this stock is worth a closer look.
🌊 Key Dividend Metrics
📌 Dividend Yield: 2.20% (Forward), 2.16% (Trailing)
📌 5-Year Average Dividend Yield: 1.76%
📌 Annual Dividend: $3.06 per share (Forward)
📌 Payout Ratio: 55.71% – Sustainable and leaves room for growth
📌 Dividend Growth Streak: Over 15 years of consecutive increases
📌 Ex-Dividend Date: February 7, 2025 – Important for those looking to capture the next payout
📌 Most Recent Dividend Payment: March 4, 2025
Dividend Overview
AWK isn’t the highest-yielding stock out there, but it offers something more important: dependability. With a dividend yield of 2.20%, it sits slightly above its five-year average, which suggests it may be offering a better-than-usual entry point for income investors.
The company’s payout ratio of 55.71% is a strong sign that its dividends are sustainable. Utilities typically have higher payout ratios due to their stable cash flows, but AWK still has room for future increases.
For investors looking for a reliable income stream, AWK fits the bill. The stock’s dividend isn’t just consistent—it has been growing year after year. While the yield may not be sky-high, the stability and track record make up for it.
Dividend Growth and Safety
AWK has steadily increased its dividend for more than 15 years. That’s an impressive track record, especially in an industry where revenue is tightly regulated. Given its financial strength, another dividend hike is likely in the near future.
A few key points that reinforce AWK’s dividend safety:
✔ The payout ratio remains at a comfortable 55.71%, leaving room for future increases
✔ Revenue growth of 16.4% year-over-year supports its ability to sustain and raise dividends
✔ Operating cash flow of $2.04 billion is more than enough to cover payouts
One potential concern is AWK’s debt load, which is common in the utility sector. However, as long as the company continues generating strong cash flow, there’s no immediate risk to its dividend.
Chart Analysis
Looking at American Water Works (AWK), the stock has been on a notable upward move after hitting a bottom in the last quarter of 2024. The price action suggests a recovery from a previous downtrend, with momentum carrying it past key resistance levels.
Moving Averages
The 50-day moving average (orange line), which often serves as a short-term trend indicator, is curling upward after a period of decline. This suggests that the stock is regaining strength and could be shifting into a more bullish phase. Meanwhile, the 200-day moving average (blue line) has been relatively flat, signaling that the broader trend is still stabilizing. The stock recently crossed above the 50-day moving average, which is generally a positive technical signal.
Price Action
AWK recently made a strong push towards the $140 level but met some resistance, as seen in the wick on today’s candle. The stock opened at $138.17, briefly climbed to $140.30, and then pulled back to close at $137.82. The long upper wick suggests selling pressure at higher levels, meaning some investors are locking in profits around this range.
There was a clear downtrend from the highs in mid-2024, with a series of lower highs and lower lows. However, the recent price action suggests that buyers are stepping in around the $120–$130 zone, where the stock previously found support.
Volume
Trading volume today was around 1.47 million shares, which is in line with the stock’s average activity. Volume spikes have been more noticeable on green days, indicating accumulation rather than distribution. This could suggest that institutional investors are stepping in, but confirmation will depend on whether this trend continues in the coming sessions.
RSI (Relative Strength Index)
The RSI indicator at the bottom of the chart has been moving higher, currently sitting in a range that suggests moderate bullish momentum. It’s not yet in overbought territory, meaning there could still be room for more upside. However, if RSI starts creeping above 70, a pullback might be on the horizon.
Last Five Candles
- March 5 – Today’s candle shows a long upper wick, meaning there was some rejection at higher levels.
- March 4 – A strong bullish candle, confirming the recent uptrend.
- March 1 – Another bullish move, with a clean break above short-term resistance.
- February 29 – A consolidation candle, with buyers and sellers balanced.
- February 28 – A decisive bullish candle, setting the stage for the recent breakout.
The stock is attempting to shift from a sideways range into an uptrend, but it still needs to clear key resistance areas. Momentum is improving, and the technical setup suggests that investors are showing renewed interest.
Analyst Ratings
American Water Works (AWK) has recently experienced a mix of analyst upgrades and downgrades, reflecting varied perspectives on its performance and future prospects.
Upgrades:
- UBS: On November 19, 2024, UBS upgraded AWK from “Neutral” to “Buy,” raising the price target from $151 to $155. This decision was influenced by AWK’s consistent earnings growth and robust market position.
- Wells Fargo: On January 7, 2025, Wells Fargo shifted its rating from “Underweight” to “Equal Weight,” adjusting the price target from $133 to $129. The upgrade was attributed to AWK’s improved operational efficiency and a favorable regulatory environment.
Downgrades:
- Mizuho: On October 15, 2024, Mizuho downgraded AWK from “Outperform” to “Neutral,” setting a price target of $140. The downgrade was due to concerns about rising operational costs and potential regulatory challenges.
- Jefferies: On October 7, 2024, Jefferies initiated coverage with an “Underperform” rating and a price target of $124, citing valuation concerns and potential headwinds in the utility sector.
Consensus Price Target:
As of March 5, 2025, the consensus among analysts is a “Hold” rating for AWK, with an average price target of approximately $140.57. This reflects a balanced view, acknowledging both the company’s strengths and potential challenges.
These mixed analyst opinions highlight the importance of considering both positive and negative factors when evaluating AWK’s investment potential.
Earnings Report Summary
American Water Works wrapped up 2024 on a strong note, delivering solid financial results that exceeded expectations. The company reported earnings per share of $1.22 for the fourth quarter, which came in higher than analysts were predicting at $1.13. For the full year, EPS landed at $5.39, up from $4.90 in 2023, showing steady growth in profitability.
Revenue also impressed, hitting $1.20 billion for the quarter, outpacing the forecasted $1.11 billion. For the year, total revenue climbed to $4.68 billion, a healthy increase from the prior year. The boost came from a combination of rate increases, customer growth, and efficiency improvements. Net income closed the year at $1.05 billion, reflecting a solid jump from $944 million in 2023.
Financially, the company continues to maintain a stable position. Total assets grew to $32.83 billion, thanks in part to ongoing investments in infrastructure and service expansion. Shareholders’ equity edged higher as well, reaching $10.33 billion. Debt levels remain manageable, with a debt-to-equity ratio staying consistent at 1.21, meaning the company isn’t over-leveraged despite significant investments.
One thing that income investors will appreciate is American Water Works’ continued commitment to dividends. The company announced a quarterly payout of $0.765 per share, bringing the annualized dividend to $3.06. That translates to a yield of around 2.19%, which is in line with expectations and keeps AWK in the category of a reliable dividend grower.
Operationally, the company is expanding at a steady pace. It now serves around 3.5 million customers across 14 states, growing both organically and through acquisitions. That steady expansion reinforces its position as the largest publicly traded water utility in the U.S.
All in all, American Water Works had a strong year. Earnings growth, revenue expansion, and a stable balance sheet suggest the company is well-positioned for the future. With infrastructure investments continuing and customer demand steady, it looks like AWK is keeping the momentum going into 2025.
Financial Health and Stability
Water utilities are known for their stability, and AWK is no exception. Its business model is built on providing an essential service, meaning demand remains steady regardless of economic conditions.
Here’s a snapshot of AWK’s financial health:
- Revenue: $4.68 billion (trailing twelve months)
- Net Income: $1.05 billion
- Return on Equity (ROE): 10.44%
- Operating Margin: 33.72%
- Debt-to-Equity Ratio: 136.7%
The company’s profitability remains strong, with a healthy operating margin and consistent earnings. The debt load is on the higher side, which is typical for utilities that require significant infrastructure investments. As long as AWK continues to manage its debt responsibly, this shouldn’t be a major issue for investors focused on dividends.
Valuation and Stock Performance
AWK isn’t a bargain stock, but quality comes at a price. It trades at a higher valuation than some of its peers, though its track record justifies the premium.
- Price-to-Earnings (P/E) Ratio: 25.83 (trailing), 24.33 (forward)
- Price-to-Book (P/B) Ratio: 2.63
- PEG Ratio (5-year expected growth): 2.98
At its current price of $137.82, AWK is trading near its 200-day moving average of $134.69. This suggests that while the stock isn’t deeply undervalued, it’s also not in overbought territory. With a beta of 0.68, AWK is less volatile than the overall market, which adds to its appeal as a steady income investment.
Risks and Considerations
No stock is risk-free, and AWK has a few potential concerns that investors should keep in mind.
Interest Rate Sensitivity
Like most utility stocks, AWK is sensitive to interest rates. When rates rise, the cost of borrowing increases, which can impact profitability. Given AWK’s reliance on debt for infrastructure investments, higher rates could pose a challenge.
Regulatory Risks
Water utilities operate under heavy regulation, which limits pricing flexibility. While this provides stability, it can also cap earnings potential. Any changes in government policies or rate adjustments could impact future growth.
Debt Levels
With a debt-to-equity ratio of 136.7%, AWK carries a significant amount of leverage. While its stable cash flows help manage this, a prolonged period of rising interest rates could make debt servicing more expensive.
Valuation Concerns
AWK trades at a premium compared to some other utility stocks. While its consistent dividend growth and stability justify this, investors looking for a discount might find it a bit pricey.
Final Thoughts
American Water Works is a solid dividend stock with a long track record of reliability. It may not offer the highest yield, but its consistent dividend growth, strong cash flow, and defensive business model make it a great option for long-term income investors.
For those looking for a stock that can provide steady income while keeping volatility low, AWK fits the criteria. Its position in an essential industry means it can weather economic downturns better than many other companies.
That said, investors should watch interest rates, regulatory developments, and debt levels. While none of these pose an immediate threat, they could impact long-term growth.
With its current yield sitting above its five-year average, AWK is offering a solid opportunity for investors who prioritize stability and dividend growth. It may not be the most exciting stock in the market, but for those focused on dependable income, it remains a strong contender.
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