Title: American Water Works; I’m Raising My Glass to its Growth Summary: #1 American Water Works operates small monopoly and sells essential products. #2 The water treatment business is highly fragmented. #3 There are lots of room for dividend growth in the upcoming years. What Makes American Water Works (AWK) a Good Business? American Water Works sell the perfect product: water. This utility company provides regulated and market-based drinking water, wastewater services and other related services to an estimated 15 million people in 47 states and in Ontario, Canada. The best part of it, AWK still has lots of room for growth as its market is highly fragmented in the U.S.: Source: AWK website Revenue & Earnings Revenue Graph from Ycharts The company …show more content…
Principle #7: Think Core, Think Growth My investing strategy is divided into two segments: the core portfolio built with strong & stable stocks meeting all our requirements. The second part is called the “dividend growth stock addition” where I may ignore one of the metrics mentioned in principles #1 to #5 for a greater upside potential (e.g. riskier pick as well). While AWK shows consistent growth pattern due to its business model, I would tend to add a position in a more conservative portfolio. The hype around the water industry may fade at one point and what will remain is a strong dividend payment. In a decade from now, this is the type of company that will pay a higher yield, but with limited stock growth perspective. AWK is a core holding. Final Thoughts on AWK – Buy, Hold or Sell? Overall, I like the business model and the company. I think there will be lots of room in the next decade for growth and the demand for water is indisputable. While the PE valuation seems high, AWK still shows enough dividend growth power under its hood to fuel a higher stock price. AWK is a buy. Disclaimer: I do not hold AWK in my DividendStocksRock