April 15, 2025 a 02:46 pm
AWK: Dividend Analysis - American Water Works Company, Inc.
American Water Works Company, Inc., a leader in the utility sector, consistently demonstrates a robust dividend profile which is attractive to income-focused investors. The company's long history of 18 years of dividend payments, without any recent cuts or suspensions, underscores its commitment to returning capital to shareholders. With a current dividend yield of 2.50%, investors can expect a steady income stream. Despite facing fluctuations in free cash flow, American Water has maintained its dividend growth, reflecting its resilient financial strategy.
📊 Overview
| Metric | Details |
|---|---|
| Sector | Utilities |
| Dividend Yield | 2.50% |
| Current Dividend per Share | 3.00 USD |
| Dividend History | 18 years |
| Last Cut or Suspension | None |
🗣️ Dividend History
The historical performance of American Water Works' dividends showcases its dedication to returning value to shareholders. Reviewing the consistency and growth of dividend payments offers insight into the company's financial health.
| Year | Dividend per Share (USD) |
|---|---|
| 2025 | 0.765 |
| 2024 | 3.0025 |
| 2023 | 2.7775 |
| 2022 | 2.5675 |
| 2021 | 2.3575 |
📈 Dividend Growth
Monitoring the growth of dividends over time highlights the company's ability to enhance shareholder returns through increasing payouts.
| Time | Growth |
|---|---|
| 3 years | 8.40% |
| 5 years | 8.96% |
The average dividend growth is 8.96% over 5 years. This shows moderate but steady dividend growth, indicative of American Water's strong operational performance.
⚠️ Payout Ratio
Analyzing payout ratios provides insight into the sustainability of the dividend payments by reflecting how much of earnings and free cash flow are distributed as dividends.
| Key figure | Ratio |
|---|---|
| EPS-based | 55.66% |
| Free cash flow-based | -65.73% |
The payout ratio of 55.66% (EPS) is in a safe range, suggesting a balance between distributing earnings and retaining for growth. However, a negative free cash flow-based ratio indicates potential liquidity concerns if maintained long-term.
✅ Cashflow & Capital Efficiency
The company's cash flow and capital utilization metrics are critical for assessing its operational efficiency and ability to fund dividend payments sustainably.
| Year | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | -3.34% | -3.38% | -4.73% |
| Earnings Yield | 4.33% | 3.71% | 2.96% |
| CAPEX to Operating Cash Flow | 1.40 | 1.46 | 2.18 |
| Stock-based Compensation to Revenue | 0.00% | 0.59% | 0.74% |
| Free Cash Flow / Operating Cash Flow Ratio | -39.66% | -45.89% | -118.41% |
Despite challenges in free cash flow yield, the company's earnings yield remains positive. Attention should be paid to capital expenditures relative to cash flow, as high CAPEX ratios can strain future free cash flow.
🗣️ Balance Sheet & Leverage Analysis
The balance sheet analysis focuses on the company's leverage and liquidity position, critical for understanding financial risk and stability.
| Year | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 1.37 | 1.27 | 1.62 |
| Debt-to-Assets | 0.43 | 0.41 | 0.45 |
| Debt-to-Capital | 0.58 | 0.56 | 0.62 |
| Net Debt to EBITDA | 5.38 | 5.13 | 6.19 |
| Current Ratio | 0.39 | 0.65 | 0.44 |
| Quick Ratio | 0.35 | 0.59 | 0.41 |
The leverage metrics suggest a strong reliance on debt financing, which could risk financial flexibility if interest rates rise. Liquidity ratios also highlight potential short-term liquidity challenges.
📊 Fundamental Strength & Profitability
This section covers the company's profitability and operational efficiency, vital for assessing its capability to sustain dividends and finance growth.
| Year | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 10.17% | 9.64% | 10.66% |
| Return on Assets | 3.20% | 3.12% | 2.95% |
| Margins: Net | 22.44% | 22.30% | 21.62% |
| Margins: EBIT | 40.18% | 39.11% | 35.60% |
| Margins: EBITDA | 57.00% | 55.74% | 52.72% |
Robust margins and steady returns on equity and assets signify operational efficiency, making the company fundamentally strong albeit with moderated return levels compared to peers.
📉 Price Development
🗳️ Dividend Scoring System
| Criterion | Description | Score |
|---|---|---|
| Dividend Yield | 2.50% | |
| Dividend Stability | Consistent payout for 18 years | |
| Dividend Growth | 8.96% over 5 years | |
| Payout Ratio | Balanced EPS at 55.66% | |
| Financial Stability | High debt leverage | |
| Dividend Continuity | Uninterrupted payments | |
| Cashflow Coverage | Challenges in free cash flow | |
| Balance Sheet Quality | Liquidity concerns |
Total Score: 28 out of 40
✅ Rating
American Water Works Company, Inc. maintains a resilient dividend profile with stable growth and consistency in payments. However, financial leverage and cash flow challenges necessitate cautious optimism. Investors seeking consistent income with potential for gradual growth may find AWK attractive. Overall, this analysis rates AWK as a stable dividend payer.