Volatile markets make investors nervous. But fluctuating share prices can be an advantage for long-term buy-and-hold investors. At this point, it makes sense to quote Peter Lynch,
“A successful stock picker has the same relationship with a drop in the market as a Minnesotan has with freezing weather. You know it’s coming, and you’re ready to ride it out, and when your favorite stocks go down with the rest, you jump at the chance to buy more.”
Which brings is California Water Service Group (CWT), a water utility stock. These companies are like electric or natural gas utilities, but provide water and wastewater treatment services.
The utility was founded in 1926 in San Jose, CA. Today, it operates in California, Hawaii, New Mexico, Washington, and Texas. It’s biggest market is California where it serves approximately two million customers. Water and wastewater treatment is an essential service. The firm grows organically and through tuck-in M&A in its markets.
Despite it’s attractive business, the stock price is down. According to Stock Rover*, the stock price is down (-5.0%) year-to-date and +7.5% in the trailing year after adjusting for dividends return. For perspective, the S&P 500 Index is up +7.5% in the past twelve months.
California Water has a forward dividend yield of around 1.82%, above the 5-year average of 1.66%. The dividend has been growing at a mid-single-digit rate for the past 5-years. Moreover, the utility is on the list of Dividend Kings with a 56-year streak of increases. However, the reasonable payout ratio of approximately 57% means the dividend is safe. In addition, the dividend quality score is top notch with an ‘A+.’
Source: Portfolio Insight*
California Water Service usually trades at an elevated valuation. But the decline in share price means it is now at P/E ratio of 30.2X, below the 5-year range. Hence, investors seeking a conservative dividend growth stock, should look at this low volatility stock.
Source: Portfolio Insight*
Disclosure: Long CWT
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.