Is AWK a good stock to buy? We came across a bullish thesis on American Water Works Company, Inc. on Quality At A Fair Price’s Substack. In this article, we will summarize the bulls’ thesis on AWK. American Water Works Company, Inc.’s share was trading at $122.49 as of June 8th. AWK’s trailing and forward P/E were 22.07 and 20.53 respectively according to Yahoo Finance.
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American Water Works Company is the largest publicly traded water and wastewater utility operator in the United States, providing essential services to nearly 14 million people across 14 states through a highly regulated and resilient business model. The company benefits from the defensive characteristics of the utility sector, where predictable cash flows, recurring revenue, and regulated rate structures create a strong foundation for long-term earnings and dividend growth.
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Despite this stability and premium market position, AWK currently appears attractively valued, with its 2.63% forward dividend yield trading roughly 60 basis points above its 5-year average yield, implying that the stock may be undervalued by approximately 23% relative to fair value based on Dividend Yield Theory. This disconnect creates an appealing opportunity for investors seeking both capital appreciation and reliable income growth.
American Water Works Company has also continued to demonstrate its commitment to shareholder returns through consistent dividend increases. The company recently raised its quarterly dividend by more than 8%, closely aligning with its impressive 10-year dividend CAGR of approximately 8.5%. This sustained dividend growth is supported by ongoing infrastructure investment, favorable rate case outcomes, and long-term demand for water and wastewater modernization across the United States.
In addition, the company’s predictable earnings profile and regulated operations provide strong visibility into future cash flows, reinforcing confidence in continued dividend expansion. With a combination of defensive business fundamentals, steady growth, attractive valuation, and a durable dividend growth profile, American Water Works Company appears well-positioned to deliver compelling long-term total returns while offering investors downside protection during broader market uncertainty.
Previously, we covered a bullish thesis on American Water Works Company, Inc. (AWK) by Max Dividends in October 2024, which highlighted the company’s resilient regulated utility operations and consistent dividend growth profile. AWK’s stock price has depreciated by approximately 11.01% since our coverage. Quality At A Fair Price shares a similar view but emphasizes on AWK’s current undervaluation based on Dividend Yield Theory and its long-term total return potential.
American Water Works Company, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held AWK at the end of the first quarter which was 50 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.
