American Water Keeps Delivering: Dividend Hikes Again and Again (AWK)

American Water Works Company, Inc. (NYSE: AWK) keeps delivering and delivering.  This is one of our top ten stocks to own for the next decade and we have been on record that this is one of the go-to safety-net stocks for almost every type of investor out there.  This one is suitable for water and utility investors, income investors, defensive investors, and even for widows and orphans.

One of the reasons we love the company  so much, outside of it being a massive water utility that has geographic diversity and local monopolies, is that its dividend keeps going higher and higher.  The company has just hiked its dividend again.  Its Board of Directors has increased its cash dividend to $0.23 per quarter from $0.22. The dividend is payable on September 1, 2011 to all shareholders of record as of August 12, 2011.

The company’s CEO noted strong earnings and cash flow improvement being consistent with dividend growth, and he further noted the company’s desire of “maintaining a good balance between cash dividends to shareholders and investment in our business.”

With shares at $29.00 after the news, American Water Works has a dividend for new investors of 3.1%.  If you picked this up earlier, your new dividend yield is considerably higher now.

The only challenge that American Water Works has for investors is that new investors never feel like they get a chance to buy into the stock.  It just almost never pulls back by 10% as that $29.00 price compares to a 52-week range of $19.92 to $30.70.

As far as how this $0.92 payout per year on an annualized basis compares to its forward earnings, Thomson Reuters has estimates of $1.70 EPS for 2011 and $1.85 EPS for 2012.

This company was our top water pick for 2011.  Our prediction: Expect to hear about another dividend hike from us next year, and the year after that, and the year after that…

JON C. OGG