Water: A hot commodity
This company is set to benefit from the growing need to repair our nation's water infrastructure.
By Mark Skousen, Hot Commodities Alert
Believe it or not, water stocks have been hot in the past year, with many up 30% or more.
Not only is demand for water rising, especially in the West, but government leaders at every level recognize the need to rebuild our water infrastructure -- replacing and relining pipes, building new water towers and treating contaminated water.
The Environmental Protection Agency recently released an emergency report stating, "The survey EPA released today shows that the nation's water systems have entered a rehabilitation and replacement era in which much of the existing infrastructure has reached or is approaching the end of its useful life."
The report continued, "This is a major issue that must be addressed so that American families continue to have the access they need to clean and healthy water sources."
The EPA estimates that private water companies might need to spend $250 billion on distribution, treatment, and storage.
One company poised to benefit is American States Water (AWR), a California public utility company engaged in the purchase, production, distribution and sale of water. American States also distributes electricity in some communities.
The company recently beat analysts' estimates by posting a 30.2% year-over-year increase in earnings per share in the first quarter, due largely to its water segment, which grew 82.1%. Revenues exceeded $470 million. It enjoys a 12% profit margin and a 13% return on equity (ROE).
American States recently approved a 14.1% increase in its third-quarter cash dividend, which rose from $0.355 to $0.405 per common share.
This is equivalent to a $0.20 increase in its annualized dividend rate to $1.62. American States has had a rising dividend policy since 1954 (!) and has never missed a dividend payment. Its current yield is 3.1%.
"This double-digit increase in our quarterly dividend and the stock split reflect our Board's confidence in the company's ability to continue to deliver solid results and its desire to have a payout ratio that is more in line with our peers," said Robert J. Sprowls, president and CEO of American States.
The stock is off 10% from its high, and now is a good time to buy. Let's add American States Water to our portfolio.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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