If you ever see the classic movie Chinatown, then you know that water is big business. American water company Inc (Ticker NYSE:awk) includes ownership of enterprises of water supply and wastewater disposal in residential, commercial, industrial, public authority, fire service and sale for resale customers. Utilities operating in approximately 1,600 communities in 16 States, about 3.4 million active connections, the client for networks of water supply and sanitation.
Investing in water
New Jersey, Pennsylvania, Illinois, Missouri, Indiana, California and West Virginia, approximately 87% of revenues in awk shares. Approximately 55% of the operating revenue comes from American water, the construction of housing and water, with 20% of the produced water, and the rest were divided among industrial water, water for public authorities, like fire stations, and wastewater treatment.
The water and wastewater industry, the beginner investor, and, apparently, it’s an extremely fragmented industry. There are more than 50 000 systems of water supply and sanitation 16 000 people in the United States alone, approximately half of drinking water systems under private ownership. Nevertheless, these systems only serve about 15% of the population.
With scale comes the opportunity for growth and earnings for awk stock has been quite impressive over the last few years. Net income in 2010 of $ 268 million increased in 2015 to $ 476 million. The last two years were moderately lower, with 2017 coming in 426 million dollars, although some of this decline is the result of reforms of tax legislation. The company was growing every year increases between 3% and 5%.
This is one of the biggest advantages of the property utilities, such as awk action. Utilities are regulated. They must be because they are regional monopolies. Consequently, utilities are not what kind of revenue they can expect annually, allowing them to get a pretty good handle on how much they can spend, and what dividends they can throw.
And on awk shares struggled with distributions in 2012, with subsequent annual increase was 14.3%, 10.7%, 9.7%, 7.7%, 10%. Between growth and acquisitions, awk has the ability to stay at or near the top of the sector of water utilities. This is largely due to the fact that its net field was relatively constant from 12.5% to 15%. Constantly was his duty to assets, which was consistently about 33%.
Another item which made the awk and the American waterworks reserve so successful that it runs at a very high level of efficiency. That efficiency allows for a more favorable rate structures for customers and has enough capital that it is able to improve the infrastructure of several companies it acquires.
The company’s 10-K points out a very sad statistic is that about 20% of purified water in the country annually, is lost due to almost a quarter million water main breaks. The country is in dire need of infrastructure modernisation, and the tool does its part to solve this problem, which apparently is also in favor of the company.
The bottom line for awk stock
As far as stocks go, it’s hard to ignore the largest public water utility in the United States.
Awk stock is about 70% from their peak, and it remains in a downtrend, I’m not sure that now is a great time to buy. As always, if you have a term of 10 years or longer, you’ll probably do just fine to stock owners. If You are in a hurry, I think I’ll wait for a lower price.
Lawrence Meyers is the CEO of PDL capital, a specialty lender focusing on consumer loans and a portfolio Manager of liberty for www.thelibertyportfolio.com. He does not have mentioned shares. He has an experience of 23 years in the stock market and has written over 2000 articles about investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.