AWR bear case

Sometimes, the best dividend payers are the ones nobody talks about.

This company is just delivering clean water, keeping the lights on, and collecting checks from the U.S. government—all while quietly hiking its dividend year after year.

With most of its revenue locked in through regulation or long-term contracts, it’s the kind of business that just keeps churning out cash. Add in inflation-adjusted deals with military bases and nearly a billion in planned infrastructure upgrades?

You’ve got a stock that may not make headlines, but it makes deposits in your portfolio.

Behind the Tap: Essential Services and Government Contracts

American States Water (AWR) operates through three core segments:

• Water and Electric Utilities: These regulated businesses provide water and electricity to communities across California, representing over 75% of total revenue.

• Contracted Services (ASUS): Through long-term (50-year) contracts with 11 U.S. military bases, it provides water and wastewater infrastructure services across the country.

Its water utility operations benefit from regulated rate increases, while the ASUS segment offers inflation-adjusted recurring revenue—a powerful growth lever as U.S. defense spending increases in the years ahead.

And with 71 consecutive years of dividend increases, this company has earned its place among the elite Dividend Kings.

Bull and Bear Breakdown: Built for Safety, but Not Without Risk

Bull Case: Utilities + Government Contracts = A Dividend Fortress

Let’s be real—this company isn’t flashy, and that’s exactly why we love it.

It sells water and electricity—stuff people use every day. Add in 50-year contracts with U.S. military bases, and you’ve got one of the most stable business models out there. Even better, most of its revenue is regulated or inflation-adjusted, which means it keeps coming in—rain or shine, recession or not.

The company just got a rate hike approved (retroactive, no less), and it has nearly $650M in capital investments lined up for the next few years. That means rising revenues and earnings are already baked into the cake.

And don’t sleep on the ASUS segment. As defense budgets grow, this contracted services business could quietly become the star of the show.

Bottom line? You’re looking at a utility with government-backed growth. That’s as solid as it gets for a dividend investor.

Bear Case: California Concentration, Rising Rates, and Climate Curveballs

Now, let’s not kid ourselves—there are a few cracks in the pipe.

First, this company is heavily tied to California, a state known for both droughts and red tape. Population growth is slowing, water availability is always a question mark, and every rate hike needs to get the green light from regulators. That’s a lot of dependence on one place.

Second, it’s a capital-intensive business. Interest rates are higher, and this company isn’t shy about spending to upgrade its infrastructure. That means more debt, more financing costs, and less wiggle room if earnings take a hit.

Finally, while ASUS is exciting, it’s not a guaranteed win. It’s competing with big players like AWK, and contract wins aren’t automatic.

So yes, the dividend is solid—but keep an eye on the pressure points. Utilities are great when they flow smoothly, but they can drip when conditions tighten.

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What’s New? Strong Start to the Year, Thanks to New Rates

The latest quarter (Q1 2025) delivered a solid performance, driven by the implementation of new water and electric rates.

• Diluted EPS rose in the Water segment

• Electric segment earnings declined slightly

• Contracted services held steady, expected to contribute $0.59–$0.63 per share for full-year 2025

There were some one-time investment losses ($0.01 per share) and dilution effects from equity issuance ($0.02 per share), but overall the company showed stability across all segments. The long-term outlook for ASUS remains bright as military-related infrastructure demand continues to rise.

Dividend Triangle in Action: Steady, Secure, and Still Rising

Let’s see how this stock performs through the lens of the Dividend Triangle:

• Revenue: Now at $608M (TTM), with a visible boost from approved rate hikes. Growth is moderate but consistent—exactly what you’d expect from a regulated utility.
• Earnings (EPS): TTM EPS is up to $3.25, rebounding from previous rate-constrained years. While not explosive, the upward trend reflects capital investments finally translating into earnings.
• Dividend: Currently at $0.466/share, the dividend has grown slowly but steadily, backed by predictable cash flows and conservative payout ratios.

Final Word: Boring? Maybe. Reliable? Absolutely.

You won’t brag about this one at a dinner party—but your future self might thank you.

This is what we call a “set it and forget it” dividend stock. It sells water and power, runs on regulated cash flow, and gets paid by Uncle Sam for work on military bases. That’s not just steady—that’s strategic.

It’s not going to double overnight. But if you’re building a portfolio for income you can actually count on, this one deserves a spot on your list.

Because when the market gets noisy, boring and predictable starts looking pretty smart.

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