Aqua America Sees More Dividend Increases Ahead

Tuesday, 14 May 2013 06:20 PM

 

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Aqua America Inc., the second-largest publicly traded U.S. water company, sees more dividend increases in the next year after raising the payments twice in nine months.

Aqua America, which reported a 23 percent rise in first-quarter net income on May 1, "can afford a nice-sized dividend," Nick DeBenedictis, chairman and chief executive officer of the Bryn Mawr, Pennsylvania-based company, said in an interview at Bloomberg’s headquarters in New York Tuesday.

The water utility announced a 9 percent increase on May 9, bringing the quarterly payment to 19 cents a share. That followed a 6 percent boost on Aug. 2. Aqua America, which dates its origins to 1886, has had more cash in part because of an agreement with Pennsylvania regulators to take advantage of "repair tax" regulations that cut its effective tax rate from 39 percent to 15 percent, he said.

The company has said it plans a payout of 60 to 70 percent. Earnings are expected to reach $1.41 a share this year, according to the average of 11 analysts’ estimates compiled by Bloomberg. A 76-cent dividend payment "only gets us to 52 percent payout," he said.

DeBenedictis said a board member once told him "you always take a quarter for yourself, give three quarters back."

Aqua America had 300,000 customers when he joined in 1992. The company, which does about 20 acquisitions a year, now serves 3 million people in 10 states. The CEO said the company will continue to look for smaller "tuck ins" to acquire water systems in smaller cities, like Media, Pennsylvania, or Manteno, Illinois.

Below Radar

"We try and stay below the radar screen, we look at what I call smaller cities, third-class cities," he said. "We would not bid if Chicago decided they wanted to privatize. It's just too complicated, too many unions, too much politics."

The company has gotten out of businesses in New York, Missouri and Maine, and is looking to exit Florida. "We tripled in size in three or fours year and now we’re digesting," DeBenedictis said.

Aqua America shares gained 1.6 percent to $32.46 at the close in New York. The shares have climbed 28 percent this year.

American Water Works Co. is the largest publicly traded U.S. water company by market value.

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