The final small-cap water utility stock I will report on for the time being is York Water Company. YORW is the oldest investor-owned water utility in the U.S., and it has been in continuous operation since 1816. This company, which has a market cap of 189M, impounds, purifies, and distributes water in York and Adams Counties, Pennsylvania. YORW owns two reservoirs, Lake Williams and Lake Redman, which have a capacity of more than two billion gallons. The company serves industry, businesses, and private homes in 34 communities.
York Water is a mini-blue chip. It has turned in a stellar performance in relation to the S&P 500 in recent years, despite having an extremely low beta of 0.08. This stock rose steadily while the S&P was having its bear market from 2000 to 2002. The shares have a current dividend yield of 2.61%.
YORW has an excellent record of steadily increasing their dividend in recent years. However, the payout ratio is rather high now at 77%, and that is not good. There have been two recent stock splits - 2-for-1 in 2002, and 3-for-2 earlier this year.
York Water has a near-monopoly on the distribution of water in the area it serves, and it looks like York County is “one of the most progressive and fastest growing areas in our whole Nation”, according to the official York County government website.
Numerous manufacturing businesses appear to be thriving in the area, including Hershey, Snyder’s of Hanover, Utz Potato Chips and many other food businesses; Harley Davidson, dinnerware and glass manufacturers, as well as several wineries and brewers, and considerable farming and dairy activity. I don’t know how our current economic slowdown is impacting current water demand in York County, but the existence of these businesses bodes well for future water demand.
After reaching a split-adjusted all-time high of 20.69 last September, the shares have undergone a correction of some 13% to date, so far, partly due to the effect of a new supply of 645,000 shares of stock the company recently sold at 17.90 to retire short-term debt incurred in recent capital expenditures.
I believe YORW will soon be offering an excellent entry point for astute long-term investors. But I am going to watch and wait for a while. The payout ratio is too high, the market looks toppy, YORW’s on-balance volume chart reflects a distribution pattern, and the short-term price trend is down.
YORW 1-yr. chart