How American Water Works Became One of the Best Stocks in America (AWK)

American Water Works Company, Inc. (NYSE: AWK) is a winner despite the stock market’s attempt to kill equities.  The company is among the few which are within striking distance of 52-week and all-time highs.  It does everything right, and now it is winning yet again as a result of raising guidance.  This remains one of our best dividend portfolio picks as well.  The company offers growth and dividends, but it may be the ultimate safety stock and defensive stock that you can find.

The water utility giant has raised its earnings guidance to an adjusted range between $1.75 and $1.82 EPS.  This compares to a prior range of $1.65 to $1.75 EPS.

American Water Works cited an “increase in system delivery related to a very hot and dry July in the company’s East Coast systems, favorable weather in the Midwest, cost efficiencies, and the continued expectations of a low interest rate environment.”  This low interest rate environment is key as utilities have to rely upon long-term borrowings in most cases.

Another gain is here as well.  The increased guidance for 2011 does not recognize the benefit to net income and EPS of the cessation of depreciation for discontinued operations in Arizona, New Mexico, Texas and Ohio.  That benefit was put at about $0.09 for 2011 EPS on a GAAP earnings basis.

American Water Works is a winner all the way around.  It is one of our Ten Stocks To Own For The Next Decade and it remains our top water stock looking out 2012 and beyond.  We expect the water utility giant to keep raising dividends for years and years.  The biggest win of all is that the company is the ultimate safety stock with a very broad geographic foot print in America where it is the local water utility monopoly.  Who cannot live without their water utility?

Shares closed at $29.50 yesterday and the stock is indicated to open above $30.00 this morning.  That puts it in striking distance for a new high as its 52-week trading range is $22.94 to $30.70.

JON C. OGG