Given that water demand is somewhat inelastic and relatively insensitive to economic conditions, it’s not surprising that many smart money holders would own shares of water-related companies for their stability (and dividend yield).
On the account of that stability, we at Insider Monkey have put together a list of some of the most popular water-related stocks among the investors we track. In this article, let’s take a closer look at American Water Works Company Inc (NYSE:AWK), SJW Corp. (NYSE:SJW), Aqua America Inc (NYSE:WTR), Middlesex Water Company (NASDAQ:MSEX), and American States Water Co (NYSE:AWR).
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).
#5 American States Water Co (NYSE:AWR)
– Number of Hedge Fund Holders (as of June 30): 8
– Total Value of Hedge Fund Holdings (as of June 30): $45.94 million
– Hedge Fund Holdings as Percent of Float (as of June 30): 2.90%
Although its annual dividend of $0.90 per share (2.32% yield at current prices) isn’t the highest payout in the industry, American States Water Co (NYSE:AWR)’s dividend is certainly among the safest. Due to the stable cash flow afforded through providing water to over 260,000 Californians, American States Water has paid a dividend every year since 1931 (and its dividend has grown every year for 61 straight years), placing the stock in very exclusive company. The company’s dividend has also increased in recent years, averaging a dividend growth CAGR of 11% since 2010. One reason for the growth is that American States Water has actively expanded by providing water services for ten military bases in seven states. The company is also actively bidding for more contracts with other bases. Billionaire Jim Simons’ Renaissance Technologies trimmed its stake in American States Water by 12% in the second quarter to 811,100 shares.
#4 Middlesex Water Company (NASDAQ:MSEX)
– Number of Hedge Fund Holders (as of June 30): 9
– Total Value of Hedge Fund Holdings (as of June 30): $34.1 million
– Hedge Fund Holdings as Percent of Float (as of June 30): 4.80%
The smart money became more bullish on Middlesex Water Company (NASDAQ:MSEX) in the second quarter. Of the around 750 funds that we track, nine funds owned $34.1 million worth of Middlesex Water Company (NASDAQ:MSEX)’s stock, which accounted for 4.80% of the float on June 30, versus eight funds and $17.44 million, respectively, a quarter earlier. One reason for the enthusiasm is Middlesex’s quarterly dividend of $0.20 per share, which translates into a 2.4% yield. Although that doesn’t sound like much, the yield is still 50% higher than the 10-year Treasury yield of 1.675%.