American Water Works
🇺🇸 AWK · NYSE/NASDAQ · US0304201033
Utilities
USD 124.27 price at analysis
Scores
Key Metrics
Powered by EODHDP/E (TTM)
22.0
P/E (Price-to-Earnings)Shows how much investors pay for each $1 of profit. We display the TTM P/E (Trailing Twelve Months) which uses actual earnings from the last 4 quarters. This is more reliable than Forward P/E which uses analyst estimates.
Calculation: 124.27 ÷ 5.65 = 22.0
TTM period through: 2026-03-31
Forward P/E (estimated): 20.6
Based on analyst estimates
Reference: Provider P/E (Trailing): 22.6
Yield (Fwd)
2.88%
Dividend YieldThe Forward yield (Fwd) shows the next announced annual dividend / current price — what you'd earn going forward. The Trailing yield (TTM) in the tooltip shows dividends actually paid in the last 12 months. Forward is shown as primary because it reflects the company's current commitment to shareholders.
Trailing Yield (TTM): 2.60%
Div. Growth (5Y CAGR)
8.7%
Growth Streak
9 yrs
Consecutive years of increase
Net Debt/EBITDA (TTM)
5.6x
Latest quarter: 24.8x
Net Debt / EBITDAA leverage ratio showing how many years of EBITDA (earnings before interest, taxes, depreciation, and amortization) it would take to repay net debt. EBITDA approximates operating cash generation. Lower ratios (e.g., <3x) are generally safer; higher (e.g., >5x) may indicate more financial risk.
TTM through: 2026-03-31
Latest quarter (2026-03-31): 24.8x
The quarterly value can spike when quarterly EBITDA is very low (e.g., one-time charges).
Quick guide: <2x manageable, >4x can be risky (sector-dependent).
Payout (Fwd)
63.4%
Payout RatioDividends as a percentage of earnings. The Forward payout (Fwd) uses the announced dividend divided by actual past earnings (TTM) — it tells you if the company can afford what it promised. Very high payouts can be risky, especially if profits fall.
Announced dividend / actual earnings (TTM)
Payout (TTM): 58.6%
Cash Flow Payout (TTM): 31.8%
FCF Coverage (TTM): -1.86x
ROE
10.2%
ROE (Return on Equity)A profitability measure: how much profit is generated from shareholders’ equity. Higher isn’t always better if it comes from high debt.
EV/EBITDA
13.5x
EV/EBITDAA valuation ratio that compares total business value (including debt) to EBITDA. Lower can mean cheaper, but context matters.
Summary
American Water Works is a premier regulated utility offering exceptional business quality, an unshakeable economic moat, and a flawless dividend growth history. Existing shareholders should maintain positions given the highly defensive nature of the asset and sustainable 60% payout ratio. However, with the yield remaining below 3% and near-term margin compression from inflation, new investors should monitor the stock for a more attractive entry point.
Sector Context
American Water Works is the largest publicly traded U.S. water and wastewater utility, providing regulated drinking water and wastewater services to millions of people. In the utility sector, stable local monopolies justify higher valuation multiples and elevated debt levels, though massive capital expenditure requirements to upgrade aging infrastructure often result in negative GAAP free cash flow.
Temporary Opportunity Identified
Higher-for-longer interest rates and inflationary pressures have temporarily compressed profit margins and increased debt servicing costs, leading to short-term earnings declines despite steady revenue growth.
📊 Strategy Analysis
- • Unshakeable economic moat as a regulated water monopoly with highly predictable revenues, supporting a 10-year dividend growth streak with an impressive 9.3% long-term CAGR.
- • P/FFO of 13.1x sits comfortably within the 12-15x fair value range for infrastructure assets, providing a more accurate reflection of cash generation than the elevated 22.0x GAAP P/E.
- • The pending mega-merger with Essential Utilities continues to gain necessary regulatory approvals, offering significant long-term scale advantages and cost synergies.
⚠ What to Watch
- • The current forward dividend yield of 2.88% falls short of the 3% minimum threshold typically required for optimal income-focused dividend portfolios.
- • Heavy infrastructure capital expenditure requirements result in persistent negative free cash flow (-$354M) and elevated Net Debt/EBITDA of 5.62x.
- • Recent margin compression and a 5-year EPS CAGR of -3.9% highlight near-term operational pressures from inflation and higher debt servicing costs.
📊 Historical Trends (10 Years)
Powered by EODHDThese charts show how key metrics have evolved over the past decade, helping you identify if the company is improving or deteriorating.
Debt Evolution (Net Debt / EBITDA)
Lower values are better. A declining trend indicates the company is reducing its debt (deleveraging).
Revenue & Earnings Growth
Consistent growth in revenueRevenue
The money a company brings in from selling its products or services. It’s the top line before costs. (blue) and earningsEarnings (Profit)
What’s left after expenses. Positive earnings mean the business made a profit; negative means a loss. (green) indicates a healthy business. Look for upward trends and recoveries after temporary dips.
Dividend Sustainability (FCF vs Dividends Paid)
Free cash flowFree Cash Flow
Cash left after the company pays for running the business and maintaining it. Often used to fund dividends, pay debt, or buy back shares. (FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., blue) should cover dividends paidDividends Paid
Cash the company paid out to shareholders. It’s not guaranteed and can change over time. (green). If dividends consistently exceed FCFFCF (Free Cash Flow)
Short for Free Cash Flow: cash left after operating needs and maintenance spending., the dividend may be at risk.
Analysis date: 2026-05-16
Disclaimer: This information is for educational purposes only. Not financial advice.