Should the call to make America great again be heeded, focus will, undoubtedly, turn to the nation's aging infrastructure. Plenty of companies will benefit -- companies like Aqua America (WTRG 1.88%). And since the best investors are well-informed investors, let's look at some things that help to provide a more complete view of the company.
Image source: Getty Images.
1. Getting water from the Keystone State
Aqua America's roots in Pennsylvania can be traced back to 1886 when a group of professors from Swathmore College were granted a charter to supply water to the residents of Springfield Township in Delaware County. Shortly, thereafter, they decided to incorporate the Springfield Water Company which would later become Aqua America.
To this day, Pennsylvania remains a vital part of the company's operation. In fiscal 2016, the company's largest subsidiary, Aqua Pennsylvania, accounted for approximately 52% of the Aqua America's operating revenue and 74% of its net income.
2. A rising tide
Since the company primarily operates in regulated markets -- the regulated segment accounted for 97.6% of revenue in FY 2016 -- it can't arbitrarily raise rates when it likes. As a result, the company relies heavily on growing through acquisitions. For the five-year period ended December 31, 2016, Aqua America completed 84 acquisitions to expand its utility operations. For fiscal 2017, Aqua America has four pending acquisitions, which will add almost 9,000 customers.
3. Keeping it clean
In addition to providing clean water to approximately three million customers, the company also provides wastewater services. According to Aqua America, everyday its 175 wastewater plants return more than 26 million gallons of wastewater to streams and river "cleaner than it came out."
Powering its facilities in several of the states in which it operates with clean energy, Aqua America relies on solar power -- among other things. For example, at its Pickering Water Treatment Plant in Pennsylvania, Aqua America installed a 6.5-acre solar field, which will effect an annual reduction of about 2.3 million kWh and energy savings of $207,000 per year.
4. Diving into the dividend
One of the things which most attracts investors to water utility stocks is the dividend. Paying a consecutive quarterly dividend for more than 70 years, Aqua America has shown a strong commitment to returning cash to shareholders.
Image source: Aqua America corporate presentation.
Raising its dividend at a compound annual growth rate of 7.6% from 2006 through 2016, Aqua America has not jeopardized the company's financial health to please its investors. From FY 2012 through FY 2016, the company has averaged an annual payout ratio of 52.4% according to Morningstar.
Further demonstrating the attractiveness of its dividend is the yield. Currently, Aqua America's stock has a dividend yield 2.25% -- the highest yield among its peers. For example, American Water Works (AWK 2.29%), the largest water utility by market cap, offers investors a dividend yield of 1.87%.
5. Gas up
Looking to spread its water wings, Aqua America formed a joint venture in 2012 with Penn Virginia Resource Partners, L.P. to provide fresh water to natural gas producers drilling in the Marcellus Shale in North-Central Pennsylvania. In fiscal 2016, the joint venture accounted for $976,000 in earnings.
In addition, Aqua Resources, a non-regulated subsidiary of Aqua America, operates five bulk water filling stations in northeastern and western Pennsylvania and one in Struthers, Ohio. From these stations, bulk water haulers fill-up and transport the water to Marcellus Shale well drilling sites.
6. Riding a strong current
Aqua America's long-term investors have been rewarded handsomely. Over the past 10 years, the stock has generated a total return of approximately 138% -- handedly beating the S&P 500, which has only risen about 60% during the same period.
WTR Total Return Price data by YCharts
7. More than just water
Aqua America's commitment to the environment transcends the return of treated wastewater to streams and rivers. Since 2005, the company has participated in TreeVitalize, a project which aims to restore tree cover to communities across Pennsylvania. According to the company, it has planted "more than 43,658 trees for 277 projects, equal to 302 acres of trees."
