Aqua America: Water on Sale
The largest publicly traded water utility in the U.S. should see calmer seas ahead -- and in the meantime its shares look like a bargain to some analysts.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
It's like finding a bright, shiny gold piece on a creek bed after the murky water clears. After three months of rough waters, shares in Aqua America are tempting buy recommendations from a couple of research outfits who spot a bargain.
Formerly known by the more prosaic moniker Philadelphia Suburban Corp., Aqua America is the largest publicly traded water utility in the U.S. The company, headquartered in Bryn Mawr, Penn., has been around for more than 100 years. Currently, it provides water and wastewater services to 2.5 million residents in 13 states.
| Row 0 - Cell 0 | Fund Watch |
| Row 1 - Cell 0 | The Best Online Broker |
| Row 2 - Cell 0 | Stock Picks From the Pros |
Analysts at brokerages Hilliard Lyons and AG Edwards on Monday upgraded their opinions of the stock from neutral to buy. Both analysts believe the shares could see $25 within a year. With the stock (symbol WTR) at $22 and yielding 2%, that implies a potential total return of 18%.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Aqua is considered the bellwether of its peer group, historically commanding a premium price relative to earnings compared with other water utilities. But since hitting an all-time high in February of nearly $30 a share, the stock has fallen almost 30%, while the median water utility stock has dropped 16% and the SP 500 stock index just 4%. Something called "regulatory lag" -- the time after a utility's costs go up but before it's allowed to raise rates -- has been squeezing earnings and is behind much of the sluggish performance. "Exploit the current weakness in share price while a window exists," exhorts James Lykins, the Hilliard Lyons analyst.
The company could post earnings for the first half of 2006 some 9% below the comparable period last year. That's the bad news. The good news is that as a consequence of those below-par earnings, Aqua shares trade at just 25 times the average analyst's 2006 earnings estimate of 85 cents a share -- about the level at which the group overall trades. Analysts, though, think Aqua will once again trade at a premium price-earnings ratio as pending rate hikes help earnings get back on track.
Another key driver of Aqua's growth will be an aggressive acquisitions strategy. Aqua could make 25 to 30 deals this year alone. The company recently announced an agreement to buy New York Water Service, with 135,000 customers, for $28 million and the assumption of $23 million in debt. In 2003 and 2004, acquisitions pumped up Aqua's customer base by more than 24% and 11%, respectively. But Aqua pays shareholders handsomely, too. Last summer the company marked its 15th dividend increase in the past 14 years. AG Edwards sees dividend growth of at least 5% annually and roughly 5.5% annual earnings growth over the long term.
And here's the kicker: once you own five shares of Aqua, you can purchase more directly from the company with no fees or commissions through the direct stock purchase program. Or you can have your dividends reinvested in company stock, at a 5% discount to prevailing market rates, through the -- in this case aptly named -- DRIP (dividend reinvestment) plan.
-
Dow Leads in Mixed Session on Amgen Earnings: Stock Market TodayThe rest of Wall Street struggled as Advanced Micro Devices earnings caused a chip-stock sell-off.
-
How to Watch the 2026 Winter Olympics Without OverpayingHere’s how to stream the 2026 Winter Olympics live, including low-cost viewing options, Peacock access and ways to catch your favorite athletes and events from anywhere.
-
Here’s How to Stream the Super Bowl for LessWe'll show you the least expensive ways to stream football's biggest event.
-
If You'd Put $1,000 Into AMD Stock 20 Years Ago, Here's What You'd Have TodayAdvanced Micro Devices stock is soaring thanks to AI, but as a buy-and-hold bet, it's been a market laggard.
-
If You'd Put $1,000 Into UPS Stock 20 Years Ago, Here's What You'd Have TodayUnited Parcel Service stock has been a massive long-term laggard.
-
How the Stock Market Performed in the First Year of Trump's Second TermSix months after President Donald Trump's inauguration, take a look at how the stock market has performed.
-
If You'd Put $1,000 Into Lowe's Stock 20 Years Ago, Here's What You'd Have TodayLowe's stock has delivered disappointing returns recently, but it's been a great holding for truly patient investors.
-
If You'd Put $1,000 Into 3M Stock 20 Years Ago, Here's What You'd Have TodayMMM stock has been a pit of despair for truly long-term shareholders.
-
If You'd Put $1,000 Into Coca-Cola Stock 20 Years Ago, Here's What You'd Have TodayEven with its reliable dividend growth and generous stock buybacks, Coca-Cola has underperformed the broad market in the long term.
-
If You Put $1,000 into Qualcomm Stock 20 Years Ago, Here's What You Would Have TodayQualcomm stock has been a big disappointment for truly long-term investors.
-
If You'd Put $1,000 Into Home Depot Stock 20 Years Ago, Here's What You'd Have TodayHome Depot stock has been a buy-and-hold banger for truly long-term investors.
