Essential Utilities (WTRG) Offers Consistent Returns Through Dividend Yield and Growth Potential

Essential Utilities (WTRG) is a water utility with a dividend yield of 3.67% and a current annualized dividend of $1.37, up 8.3% from last year. The company has increased its dividend 5 times in the past 5 years, with a payout ratio of 56%. WTRG is expecting earnings to expand this fiscal year and has a Zacks Rank of #2 (Buy). The stock has seen a price change of 2.7% since the start of the year and is an attractive dividend play.

American States Water Company (AWR) is poised to benefit from a growing customer base, regulatory approvals, and long-term contracts with military bases, which are expected to boost its financial performance. The company's subsidiary, American States Utility Services (ASUS), has successfully transitioned to operate water and wastewater systems at two new military bases in April 2024, securing $56.5 million in new capital upgrade projects for military bases it serves. These long-term defense pacts provide stability to AWR's earnings, with ASUS well-positioned to compete for future military base contract awards. The company also benefits from approved rate cases for regulated utilities, which provide a clear path for revenue and earnings growth, allowing it to invest in infrastructure.

However, AWR faces risks, including groundwater contamination and excessive dependency on a single state, California, particularly Southern California. The company's financial performance is heavily influenced by political, water supply, labor, utility cost, and regulatory risks, as well as economic conditions, natural disasters, and other factors affecting the state. In the past month, shares of AWR have lost 3.4% against the industry’s 0.1% growth.

Some better-ranked stocks in the industry are Consolidated Water (CWCO), California Water Service Group (CWT), and Global Water Resources (GWRS), each carrying a Zacks Rank #2 (Buy) at present. CWCO has delivered an average earnings surprise of 40.1% in the last four quarters, while CWT has a long-term earnings growth rate of 8.78% and an average earnings surprise of 51.6% in the last four quarters. GWRS is expected to see a year-over-year decline of 23.1% in 2025 EPS, with year-over-year sales growth of 6%.