Reasons to Add American Water Works Stock to Your Portfolio Right Now

American Water Works AWK continues to benefit from organic growth as well as acquisitions. Consistent returns from AWK's military contracts are contributing to its top-line performance. Given its growth opportunities, AWK makes for a solid investment option in the utility sector.

Let’s focus on the factors that make this Zacks Rank #2 (Buy) company a strong investment pick at the moment.

AWK’s Growth Projections & Surprise History

The Zacks Consensus Estimate for 2025 earnings per share (EPS) is pinned at $5.71, indicating a year-over-year increase of 5.9%.

The Zacks Consensus Estimate for 2025 sales is pinned at $4.85 billion, indicating a year-over-year increase of 3.6%.

American Water Works’ long-term (three to five years) earnings growth rate is 7.4%. The company delivered a trailing four-quarter average earnings surprise of 0.8%.

Debt Position of AWK

Currently, American Water Works’ total debt to capital is 56.05%, better than the sector’s average of 59.23%. 

The time-to-interest earned ratio at the end of the first quarter of 2025 was 3.6. The ratio, being greater than one, reflects the company’s ability to meet future interest obligations without difficulties.

AWK’s Return on Equity

ROE indicates how efficiently a company has been utilizing the funds to generate higher returns. Currently, American Water Works’ ROE is 10.35%, higher than the sector’s average of 9.98%. This indicates that the company has been utilizing the funds more constructively than its peers in the utility sector.

Dividend History of AWK

American Water Works has been consistently increasing the value of its shareholders through dividends. The company expects its earnings and dividend per share to increase in the range of 7-9% in the long term. Currently, its annual dividend is $3.31 per share. Its current dividend yield is 2.35%, better than the Zacks S&P 500 composite's average of 1.24%.

AWK Gains From Strategic Acquisitions

The company is expanding its customer base through organic initiatives and acquisitions. In 2024, it completed 13 acquisitions, which added 69,500 customers. AWK completed three acquisitions in three states as of April 30, 2025. The pending 18 acquisitions (as of April 30, 2025), when completed, will add another 37,400 customers to its customer base. Acquisitions provide the company with fresh demand for its services and help expand its revenue stream.

AWK remains committed to expanding its business through inorganic and organic means. It continues to focus on the acquisition of utilities that provide services to 5,000-50,000 customers.

AWK’s Share Price Performance

Year to date, the stock has returned 13.4% compared with the sector’s growth of 6.3%.

Other Stocks to Consider

A few other top-ranked stocks from the same sector are Artesian Resources ARTNA, sporting a Zacks Rank #1 (Strong Buy), and California Water Service Group CWT and NiSource NI, both carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for ARTNA’s 2025 EPS implies an improvement of 9.1% from the bottom line recorded in 2024. It delivered an average earnings surprise of 18.6% in the last four quarters. 

CWT’s long-term earnings growth rate is 8.78%. The company delivered an average earnings surprise of 57.9% in the last four quarters. 

NI’s long-term earnings growth rate is 7.88%. The Zacks Consensus Estimate for 2025 EPS indicates year-over-year growth of 7.4%.

 

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This article originally published on Zacks Investment Research (zacks.com).

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