April 26, 2025 a 07:31 am
AWK: Dividend Analysis - American Water Works Company, Inc.
American Water Works Company, Inc., a prominent entity within the utilities sector 🚰, presents an intriguing dividend profile marked by stability and moderate growth. Its enduring dividend history reflects a commitment to shareholder value, while its strategic financial maneuvers ensure resilient payout ratios. With an 18-year history of uninterrupted dividends, AWK exemplifies dividend reliability. However, the negative free cash flow yield and high debt-to-equity ratio suggest areas of financial examination.
Overview 📊
Positioned in the Utilities sector, American Water Works showcases a dividend yield of 2.50%, underpinned by a current dividend per share of $3 USD. With an impressive 18-year dividend payment history, the last cut or suspension has been notably absent 📈, underscoring executive commitment to robust investor returns.
| Metric | Value |
|---|---|
| Sector | Utilities |
| Dividend Yield | 2.50% |
| Current Dividend per Share | $3 USD |
| Dividend History | 18 years |
| Last Cut or Suspension | None |
Dividend History 📉
Examining the dividend trajectory offers valuable insights into fiscal reliability. American Water Works' steadfast record of dividend payments over nearly two decades signals resilience and investor focus. Such consistency fortifies investor confidence, acting as a financial stabilizer in volatile market environments. 💼
| Year | Dividend per Share (USD) |
|---|---|
| 2025 | 0.765 |
| 2024 | 3.0025 |
| 2023 | 2.7775 |
| 2022 | 2.5675 |
| 2021 | 2.3575 |
Dividend Growth 📈
Tracking dividend growth rates is crucial for assessing future income expansion potential. For American Water Works, the dividend growth rate over 3 years stands at 8.39%, with a 5-year growth at 8.96%. This pattern indicates a stable upward trend, fostering long-term income augmentation for shareholders. Consistent growth in dividends can signify underlying enterprise strength and profitability. 📊
| 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.
Payout Ratio ✅
Payout ratios reveal how well earnings support dividend commitments. American Water Works boasts a payout ratio of 55.66% (EPS-based) and -65.73% (FCF-based). While EPS-based ratios indicate expected payout adherence, negative FCF ratios highlight cash flow issues requiring management attention. These metrics underline the provider's adept balance in sustaining dividends. 🎯
| Key Figure | Ratio |
|---|---|
| EPS-based | 55.66% |
| Free cash flow-based | -65.73% |
The EPS-based payout ratio suggests sustainable dividend distributions, whereas the negative FCF payout hints at underlying liquidity challenges that require managerial intervention.
Cashflow & Capital Efficiency 🚀
Cash flows reflect fiscal health and operational effectiveness. American Water Works faces challenges with negative free cash flow yield amidst robust earnings yield. High CAPEX relative to operating cash flow denotes infrastructure investments, while stock compensation alone minimally impacts revenue. These figures invite consideration of cash stability and operational leverage. 📅
| Year | 2024 | 2023 | 2022 |
|---|---|---|---|
| Free Cash Flow Yield | -3.40% | -3.38% | -4.73% |
| Earnings Yield | 4.33% | 3.71% | 2.96% |
| CAPEX to Operating Cash Flow | 143.52% | 145.89% | 218.41% |
| Stock-based Compensation to Revenue | 0.00% | 0.59% | 0.74% |
| Free Cash Flow / Operating Cash Flow Ratio | -39.66% | -45.89% | -118.41% |
The company needs to address negative free cash flow to improve its capital efficiency, despite maintaining reasonable earnings yields and infrastructure growth.
Balance Sheet & Leverage Analysis 📑
Financial integrity is assessed through leverage metrics; high debt equivalents necessitate scrutiny. AWK's debt-to-equity and net debt to EBITDA ratios reflect stretched leverage, demanding efficient capital management. Meanwhile, a modest current ratio highlights quick liquidity concerns, prompting vigilant cash handling. 📌
| 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 | 5.25 | 5.13 | 6.19 |
| Current Ratio | 0.39 | 0.65 | 0.45 |
| Quick Ratio | 0.35 | 0.59 | 0.41 |
| Financial Leverage | 3.18 | 3.09 | 3.61 |
With considerable leverage ratios, American Water Works must manage liabilities efficiently to maintain its financial health and minimize risk exposure.
Fundamental Strength & Profitability 💪
Key profitability indicators offer insights into operational efficacy. AWK holds moderate return metrics, with returns showcasing a solid mix of capital deployment. Net margins marginally trail, demanding enhanced cost efficiencies. Combined, these metrics outline a foundational base for continued profit maximization. 🚀
| Year | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 10.17% | 9.64% | 10.66% |
| Return on Assets | 3.20% | 3.12% | 2.95% |
| Net Margin | 22.44% | 22.30% | 21.62% |
| EBIT Margin | 40.18% | 39.11% | 35.60% |
| EBITDA Margin | 57.00% | 55.74% | 52.72% |
| Gross Margin | 60.33% | 59.38% | 58.10% |
| R&D to Revenue | 0% | 0% | 0% |
The robust EBIT and gross margins bolster confidence in American Water Works' operational stability, while the overall profit landscape may benefit from strategic cost reductions.
Price Development 📈
Dividend Scoring System ⭐
| Criteria | Score (out of 5) | Score Bar |
|---|---|---|
| Dividend Yield | 3 | |
| Dividend Stability | 4 | |
| Dividend Growth | 3 | |
| Payout Ratio | 3 | |
| Financial Stability | 3 | |
| Dividend Continuity | 4 | |
| Cashflow Coverage | 2 | |
| Balance Sheet Quality | 3 |
Total Score: 25/40 ⚖️
Rating 🗣️
American Water Works Company, Inc. maintains a noteworthy dividend track record characterized by moderate growth and robust consistency. Investors may find value in its dividend continuity and yield stability. Nonetheless, prudent investors should monitor cash flow coverage and leverage metrics closely. Overall, while not without certain challenges, AWK's dividend that remains a compelling investment prospect for income-focused investors.