Not Another Utility Stock!!!

Inflation-Beating Dividend Growth From This Stalwart

August 06, 2025

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Does this newsletter review a lot of water utility stocks?

Yes.

Is there a reason for this?

Yes.

Water utility stocks are some of the oldest and most reliable sources of dividend income. They are essentially geographical monopolies, they collect recurring revenue via monthly customer billing, and they provide an essential product that everyone depends on.

The oldest dividend stock in the United States, The York Water Company, is a water utility.

And the stock with the longest dividend growth streak in the United States is also a water utility. It’s called American States Water Company ($AWR) and it has raised its dividend every year for 71 years.

American States Water Company is the focus of today’s special report.

It’s a straightforward business that consistently raises its dividend at a rate that outpaces inflation. And despite the steady and stable income growth, shares of American States Water Company are down -3.83% year-to-date.

Here’s what the business does and why it may interest you…

American States Water Company ($AWR)

American States Water Company provides regulated water and electrical services to over one million customers across nine different states. The company dates back to 1929 and American States Water Company has paid dividends every year since 1931.

In fact, the company recently announced its 357th consecutive dividend payment.

American States Water Company is also a dividend growth stock, hiking its payouts for 71 consecutive years. And, the firm grows its dividend at a rate that outpaces inflation.

Over the past 5 years, American States Water Company has delivered an inflation-beating compound annual dividend growth rate of 8.82%. And with a payout ratio of just 56.20%, there’s plenty of room for future hikes.

In terms of starting yield and performance, American States Water Company was trading at a premium about a year ago. But since then, the company has sold-off is now valued at a price to earnings ratio of 22.79. The company also offers a starting yield of 2.70%. Maybe not super impressive, but higher than the 2.27% staring yield American States Water Company offered around this time last year.

Additionally, American States Water Company’s starting dividend, and dividend growth, are actually better than what Vanguard’s “High Dividend Yield Index Fund ETF” ($VYM) offers.

Here’s what American States Water Company’s metrics look like:

  • Forward PE ratio of 22.79

  • 2.70% starting dividend yield

  • 5-year dividend CAGR of 8.82%

  • Payout ratio of 56.20%

  • 10-year average annual total return of 9.06%

The Vanguard High Dividend Yield Index Fund ETF currently pays a 2.65% starting dividend yield with a 5-year compound annual dividend growth rate of just 3.59%.

Vanguard’s ETF has a slightly better 10-year average annual total return at 10.37%, but the fund is near its 52-week high. Meanwhile, American States Water Company has delivered a 10-year average annual total return of 9.06% during a sell-off.

American States Water Company’s starting yield isn’t the highest in the water utility sector. But it is rapidly growing. And this is a quality stock that’s fallen out of favor.

In general, water utility stocks are down this year. Wall Street views them as boring. And many investors don’t care about a 3-4% starting yield when they can earn more from bonds or treasury bills.

Personally, I think this is the perfect time to invest.

Businesses like American States Water Company may be “boring” compared to high-flying tech stocks, but water is a timeless commodity.

And while American States Water Company’s 2.70% starting dividend yield isn’t particularly high, it is higher than the Vanguard High Dividend Yield Index Fund ETF’s 2.65% starting yield. Additionally, American States Water Company has faster dividend growth.

American States Water Company has raised its dividend every year for 71 years. And the company should continue this streak well into the far future.

Boring business? Sure. Stable business that consistently hikes its payouts at a rate that outpaces inflation? Yes. And because of this, I think American States Water Company could be a fantastic “buy it and forget it” long-term investment that steadily compounds over time.

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Disclaimer: This article is for entertainment purposes only. It is not financial advice, always do your own research.