Connecticut Water Service, Inc. (CTWS - Free Report) announced that its board of directors has approved an increase in the annualized cash dividend rate by 5.3%, for an annualized dividend of $1.19. The revised quarterly dividend is expected to be about 29.75 cents per share payable to shareholders of record at the close of business on Jun 15, 2017.
The improving cash flow of the company has enabled it to carry out shareholder-friendly moves. Moreover, the current hike by the company has increased its dividend rate consecutively for the last 48 years.
The current dividend yield of the company is 2.26% better than the S&P 500 yield of 1.83%.
Reason Behind Strong Performance
Connecticut Water continues focus on maintaining its water infrastructure system to deliver safe, dependable drinking water. Moving ahead, it plans to spend nearly $55.8 million to continue enhancing system reliability, water quality, public fire protection, and protecting sensitive data.
In fact, Connecticut Water Service is being able to reliably serve its expanding customer base owing to consistent investments in its regulated operation. Additionally, constructive regulatory environment and timely rate relief is boosting the performance of the company.
The company derives nearly 95% of its earnings from regulated operations. It aims to invest nearly $150 million in the 2017 to 2019 timeframe, to strengthen its existing water infrastructure.
Meanwhile, Connecticut Water Service has been engaged in strategic acquisitions of smaller water service providers like that of Heritage Village Water Company very recently in February. In the last seven years the company made over 40 acquisitions, in sync with its expansion plans.
Contributions from organic and inorganic assets have placed the company on a strong financial footing, allowing it to carry on shareholder-friendly moves.
Capital Investment Essential for Water Industry
The old water utility infrastructure needs ample investments, which are easier for bigger players to undertake. Consolidation would therefore drive the necessary infrastructure overhauls that have become imperative for the industry at large.
Connecticut Water Service has already chalked out plans for capital expenditures of $150 million for the 2017 to 2019 time period. In addition, Aqua America Inc. (WTR - Free Report) , another water utility, is looking forward to make capital investments of over $450 million in 2017 as part of an ambitious investment target of over $1.2 billion in the same period.
Another water utility company, American Water Works Company, Inc. (AWK - Free Report) , has plans to invest $1.5 billion in 2017. In five years, the company aims to invest $5.9 billion in improvement of the infrastructure.
In the last twelve months, Connecticut Water Service has outperformed the Zacks categorized Utility-Water Supply industry. During this period, the company’s shares rallied 7.5% compared with the industry’s gain of 6.6%.
Connecticut Water Service operates in a constructive regulatory environment that ensures necessary revisions in water rates. As the company generates the majority of its earnings from regulated operations, a favorable regulatory climate is likely to continue boosting results.
Stock to Consider
Connecticut Water Service currently has a Zacks Rank #4 (Sell). Instead investors can consider Pure Cycle Corp. from the same space holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The second-quarter fiscal 2017 results of the company were in-line with Zacks Consensus Estimate. In fact, Pure Cycle’s estimate for fiscal 2017 has remained same for last 90 days. However, in same time period its fiscal-2018 estimates have moved up substantially from a loss of 2 cents to earnings of 9 cents.
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