Dividend growth investing is arguably one of the best ways investors can grow their wealth, and eventually, retire on. The utility sector, in particular, usually displays above-average yields, with many companies offering slow but reliable dividend growth opportunities, as they enjoy stable and less volatile cash flows compared to other industries.
Around a month ago, we covered California Water Service (CWT), whose 52-year dividend growth record is a testament to the resiliency and long-term capital returns utility companies, especially those involved in providing water, can achieve. However, as we discussed in that article, such safety usually comes at a cost. As investors attempt to capture the trustworthy yields provided by these companies, they send shares higher, to quite high valuations.
As a result, there is usually little surplus left for current investors, who end up having little to no margin of safety if they choose to invest at current price levels. In a search for low volatility dividend growth companies, today, we will cover Essential Utilities (NYSE:WTRG), which is the second-largest U.S. publicly-listed water provider, only behind American Water Works (AWK).
Featuring an attractive dividend growth record of 29 years of consecutive dividend increases, let's assess whether this company offers a more investable case, with a higher expected return potential, compared to the usually pricey rest of the water stocks.
In this article, we will:
- Discuss the company's financials and future prospects
- Assess the stock's valuation and expected returns
- Conclude why shares may offer a decent opportunity for dividend growth investors.
Financials and future prospects
Investors who were familiar with the company in the past may recall it as "Aqua America." Its name was only changed to Essential Utilities this year, in order to reflect its acquisition of Peoples, a natural gas distribution provider, in its pursuit to diversify its operations
