Better Buy: American Water Works vs. California Water Service Group

Income investors looking for low-risk growth may find what they're looking for in water stocks. That's because water utilities usually operate in regulated markets, which provide reliable long-term growth. If a company maintains, modernizes, and invests in water distribution infrastructure, then it can ask state regulators for rate increases. Some of the revenue from approved rate increases is distributed to shareholders as a dividend, while the remaining capital is redeployed into the next round of infrastructure investments. Rinse and repeat.

The largest publicly traded water utility, American Water Works (NYSE: AWK), is often the measuring stick for the industry, but several smaller regional players have intriguing growth prospects. Would investors be better off buying the leader or the much smaller California Water Service Group (NYSE: CWT)?

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Source: Fool.com