American Water Works

Methodology

American Water Works' regulated water and wastewater utility business provides extremely predictable earnings based on approved rate structures across multiple states. The company's essential service monopoly and rate-base growth strategy create stable earnings visibility. This calculation works very well for American Water given regulatory protections and consistent execution, making fair value estimates highly reliable as the largest publicly traded water utility.

Methodology

American Water's PEG ratio typically ranges from 3.0-4.0, appearing expensive but reflecting the ultimate defensive utility with essential service monopolies and regulatory protection. The company's steady mid-single-digit earnings growth from infrastructure investment and rate increases justifies premium valuations given bond-like stability. Compare to other regulated utilities and water/wastewater peers to assess whether American Water's scale and execution track record command appropriate premiums.

Methodology

American Water's dividend yield (typically 2.0-2.5%) combined with consistent growth makes PEGY essential for evaluating this defensive utility investment. The company targets steady dividend increases aligned with regulated earnings growth from water infrastructure investment. PEGY provides crucial context for utility investors, as the combination of yield and predictable growth creates the low-volatility total return profile that attracts conservative capital to water utilities.