American Water Works’ shareholders are still doing fine

Earlier this month, American Water Works, WV American Water’s NJ-based parent company, had its third quarter 2014 earnings call with investors. The company’s presentation is available here. The company’s dividend payout to shareholders is still going up – from $0.28 cents/share in 2013 to $0.31 cents/share in 2014. With 179.3 million shares of stock outstanding, that’s another $5.3 million per quarter ($21 million per year) that American Water Works is paying to its shareholders instead of reinvesting in infrastructure.

The shareholder presentation also gives a pretty clear picture of why the parent company isn’t all that interested in making investments in West Virginia. Slide 5 says that American Water Work’s return on equity (profit rate) for the 12 months ending September 2014 was 8.8%. Looking back for the past few years, here’s a comparison of the profit rate of the parent company versus it’s WV subsidiary:

Clearly, WV American Water does not stack up too well against the parent company average. This means that American Water Works has little financial incentive to invest money in its West Virginia operations – a fact clearly reflected in our leaky distribution system and ill-equipped chemical testing facilities.

*Sources for table: American Water Works 4Q 2013 investor presentation; WV American Water 2012 rate case; and WV American Water 4Q 2013 metrics reported to WV PSC

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