Is AWK a good stock to buy? We came across a bullish thesis on American Water Works Company, Inc. on Compounding Dividends’s Substack by TJ Terwilliger. In this article, we will summarize the bulls’ thesis on AWK. American Water Works Company, Inc.’s share was trading at $133.58 as of March 24th. AWK’s trailing and forward P/E were 23.86 and 22.42 respectively according to Yahoo Finance.
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American Water Works Company, Inc. (AWK) is the largest private water and wastewater utility in the United States, serving 14 million people across 24 states through 55,000 miles of pipes. Operating as a regulated monopoly, the company benefits from exclusive service territories, which create a wide moat and predictable revenue streams.
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Its core business is straightforward: owning and managing water treatment plants and distribution networks, with the vast majority of revenue coming from regulated water services ($4.23 billion, 82% of total 2025 revenue), supplemented by wastewater services, military contracts, and other regulated operations.
AWK has grown both organically and through acquisitions, integrating small municipal water systems to expand its scale efficiently. Management, led by CEO John C. Griffith and CFO David M. Bowler, has demonstrated disciplined capital allocation, attractive returns on equity, and a consistent track record of dividend growth, with a 5-year rate of 8.6% and uninterrupted increases since 2008. The company benefits from favorable long-term trends, including the aging U.S. water infrastructure, climate-related pressures, stricter PFAS regulations, and the essential nature of water services, which supports stable demand and the potential for 7–9% EPS growth annually.
Risks include regulatory delays in approving rate increases, high interest rates on debt, and environmental compliance costs, all of which the company mitigates through diversified state operations, long-term fixed-rate financing, and rate recovery strategies.
With an investment-grade balance sheet (S&P A, Moody’s Baa1), a strong interest coverage ratio (3.1x), and a payout ratio under 60%, AWK offers investors a resilient, cash-generative utility positioned for steady growth, making the current stock price an attractive entry point given its scale, monopoly advantages, and long-term investment plan.
Previously, we covered a bullish thesis on American Water Works Company, Inc. (AWK) by Max Dividends in October 2024, which highlighted the company’s long-standing dividend growth, strong financial health, and resilient utility operations across 14 states. AWK’s stock price has depreciated by approximately 2.96% since our coverage. TJ Terwilliger shares a similar view but emphasizes AWK’s scale, regulated monopoly advantages, acquisition-driven growth, and long-term EPS tailwinds, providing a more operationally focused perspective.
American Water Works Company, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 50 hedge fund portfolios held AWK at the end of the fourth quarter which was 53 in the previous quarter. While we acknowledge the risk and potential of AWK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AWK and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
