August 29, 2025 a 02:47 am
AWK: Dividend Analysis - American Water Works Company, Inc.
American Water Works Company, Inc. presents a reliable investment opportunity with steady dividend growth over the past 18 years. The moderate dividend yield, coupled with a responsible payout ratio, demonstrates the company's ability to reward shareholders while managing its financial obligations effectively. This consistent dividend history, with no significant cuts or suspensions, underscores its commitment to shareholder returns and financial stability.
📊 Overview
| Metric | Value |
|---|---|
| Sector | Utilities |
| Dividend yield | 2.24% |
| Current dividend per share | 3 USD |
| Dividend history | 18 years |
| Last cut or suspension | None |
🗣️ Dividend History
The company's 18-year dividend history is a testament to its commitment to shareholders. The absence of cuts or suspensions shows resilience even during economic downturns, fostering investor trust.
| Year | Dividend Per Share (USD) |
|---|---|
| 2025 | 2.42 |
| 2024 | 3.0025 |
| 2023 | 2.7775 |
| 2022 | 2.5675 |
| 2021 | 2.3575 |
📈 Dividend Growth
The consistent dividend growth over the years illustrates the company's financial health and commitment to increasing shareholder returns.
| 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
A balanced payout ratio is crucial for maintaining dividend sustainability. A prudent payout ensures that the company can invest in growth opportunities while returning capital to shareholders.
| Key figure | Ratio |
|---|---|
| EPS-based | 54.02% |
| Free cash flow-based | -61.44% |
The EPS-based payout ratio of 54.02% is within a healthy range, indicating a sustainable dividend policy. However, the negative cash flow-based payout ratio suggests potential challenges in free cash flow generation.
✅ Cashflow & Capital Efficiency
Cash flow metrics are essential indicators of a company's financial flexibility and efficiency in utilizing its capital for growth and shareholder returns.
| Metric | 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 | 140.66% | 145.89% | 218.41% |
| Stock-based Compensation to Revenue | 0% | 0.59% | 0.74% |
| Free Cash Flow / Operating Cash Flow Ratio | -39.66% | -45.89% | -118.41% |
These metrics suggest challenges in cash generation, with negative free cash flow yields and high CAPEX ratios indicating significant reinvestment into the business, possibly impacting cash availability for dividends.
🏦 Balance Sheet & Leverage Analysis
A strong balance sheet with manageable leverage is crucial for long-term stability and capitalizing on growth opportunities without risking financial strain.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Debt-to-Equity | 1.3657 | 1.2700 | 1.6186 |
| Debt-to-Assets | 0.4298 | 0.4107 | 0.4481 |
| Debt-to-Capital | 0.5773 | 0.5595 | 0.6181 |
| Net Debt to EBITDA | 5.3289 | 5.1322 | 6.1866 |
| Current Ratio | 0.3505 | 0.6457 | 0.4447 |
| Quick Ratio | 0.3530 | 0.5937 | 0.4098 |
| Financial Leverage | 3.1775 | 3.0926 | 3.6120 |
The balance sheet metrics highlight moderate leverage, which is typical for utility companies. The current and quick ratios show potential liquidity challenges that need careful management.
📈 Fundamental Strength & Profitability
Profitability metrics provide insights into a company's operational efficiency and ability to generate returns from its assets and equity.
| Metric | 2024 | 2023 | 2022 |
|---|---|---|---|
| Return on Equity | 10.17% | 9.64% | 10.66% |
| Return on Assets | 3.20% | 3.12% | 2.95% |
| Return on Invested Capital | 4.26% | 4.12% | 3.92% |
| Net Profit Margin | 22.44% | 22.30% | 21.62% |
| Gross Profit Margin | 60.33% | 59.38% | 58.10% |
| EBIT Margin | 40.18% | 39.11% | 35.60% |
| EBITDA Margin | 57.00% | 55.74% | 52.72% |
| Research & Development to Revenue | 0% | 0% | 0% |
American Water Works demonstrates solid profitability and efficiency metrics, underlining its competitive positioning and ability to generate strong returns on equity and assets.
Price Development
📋 Dividend Scoring System
| Category | Score | Score Bar |
|---|---|---|
| Dividend yield | 3 | |
| Dividend Stability | 5 | |
| Dividend growth | 4 | |
| Payout ratio | 3 | |
| Financial stability | 3 | |
| Dividend continuity | 5 | |
| Cashflow Coverage | 2 | |
| Balance Sheet Quality | 3 |
Total Score: 28/40
⭐ Rating
American Water Works Company, Inc. offers a sound investment proposition with a strong dividend history and moderate growth potential. While the negative free cash flow may pose challenges, the firm's solid profitability and stable financial leverage provide a buffer. Recommended for investors seeking steady dividend income with moderate growth.