April 2026 was a good month for dividend investors. Parker Hannifin (PH) increased its quarterly cash dividend by 11% to $2.00 per share, marking its 304th consecutive quarterly dividend, with the payment scheduled for June 5, 2026. Johnson & Johnson (JNJ) also maintained its streak, increasing its quarterly payout by 3.1% from $1.30 to $1.34 per share for its 64th consecutive year of dividend growth. Southern Company (SO) followed suit, posting its 25th consecutive annual dividend increase and raising its annualized payout to $3.04 per share. In simple terms, many companies spent April showing investors that dividends are still important.
American Water Works (AWK) was part of that group. On April 29, 2026, the company announced a quarterly cash dividend of $0.8950 per share, up 8.2% from the previous quarter, payable on June 2, 2026 to shareholders of record as of May 12, 2026. That increase fits with management’s long-term goal of increasing the dividend by 7% to 9% annually.
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Still, the stock hasn’t really acted like a winner. AWK has lagged both the S&P 500 ($SPX) and the Dow ($DOWI) in several recent periods, even though the company’s core business has remained fairly stable. So is this dividend increase a signal to buy the dip, or is the market remaining cautious for some reason? Let’s find out.
The numbers behind American waterworks
American Water Works is the largest publicly traded water and wastewater utility in the U.S., relying on regulated operations that generate consistent, predictable cash flow. Over the past 52 weeks, AWK stock is down 15% and 4% year-to-date (YTD).
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At the current price, AWK trades at a Forward P/E of 20.90x, above the industry average of 18.81x, so the market is still willing to pay a premium for that stability.
The revenue side is key. American Water recently increased its dividend by 8%, marking 19 consecutive years of increases. The stock yields about 2.60%, below the utility average of 3.75%, but that comes with a reasonable forward payout ratio of 56.83% and regular quarterly checks. The most recent dividend was $0.827, paid on February 10, 2026.
In the first quarter of 2026, GAAP earnings were $1.00 per share, down slightly from $1.05 a year earlier. Adjusted EPS was $1.01, down from $1.02 in the prior-year quarter, after removing costs tied to the proposed Essential Utilities merger and interest income from the redeemed HOS-secured seller note. Management still reaffirmed full-year 2026 EPS guidance of $6.02 to $6.12 and its long-term targets, and raised $700 million of 5.200% senior notes due 2036 in April to help fund continued growth.
The long-term factors supporting the Bull case
American Water Works and Essential Utilities have already gained approval from the Kentucky Public Utilities Commission for their stock merger after shareholder approval in February 2026.
The combined company is expected to serve more than 4.7 million water and wastewater connections and more than 740,000 gas customers under the American Water name, and the deal aims to close by the end of the first quarter of 2027, pending federal and state approvals. That would notably expand American Water’s regulated footprint and customer base, giving it more stable profits over time.
The growth story continues to revolve around infrastructure. In West Virginia, the company is working on a $550,000 project to replace 1,020 feet of old pipe, part of a broader plan to put more than $134 million to work statewide by 2026. Those types of regulated projects support future rate increases and also help local economies, with studies showing that every $1 million spent on water infrastructure can create about 10 jobs.
Financing is another key piece. In Pennsylvania, American Water secured $25.87 million in grants and low-interest loans from PENNVEST for projects including the rehabilitation of Griffin Dam. With interest rates starting at just 1%, that money helps keep financing costs low while the company upgrades its systems and improves reliability.
Analysts weigh AWK’s next move
Analysts expect earnings of $1.51 for the June 2026 quarter, up from $1.48 a year earlier, and $2.11 for the September 2026 quarter, down from $1.94 in the year-earlier period. For the full year, the consensus calls for $6.09 in earnings by 2026, up from $5.64. That translates to estimated year-on-year (YoY) growth rates of 2.03% for the current quarter, 8.76% for the next quarter, and 7.98% for fiscal 2026.
In January 2026, Campanella reiterated his “Sell” rating on AWK and maintained a price target of $122, a noticeably more cautious stance than the Street’s broader view. Wells Fargo has taken a more measured approach. After lowering its target from $142 to $126 in January, the company raised it to $131 on April 21, just before its first-quarter report, while maintaining an “equal weight” rating.
That broader stance remains cautious. The 13 analysts covering AWK currently rate it a “Hold” by consensus, with an average price target of $141.18. Based on current share price levels, that implies a drop of around 11%.
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Conclusion
AWK looks more like a stable buy than an obvious bargain at this point. The new 8.2% dividend increase, reaffirmed 2026 EPS guidance of $6.02 to $6.12, and long-term dividend growth target of 7% to 9% support the argument that the business is still running even if the stock has lagged. With analysts sitting in a “Hold” position and an implied upside of around 11%, my base case is that the stock is more likely to rise modestly than spark a strong rally in the near term, making AWK stock look better suited for patient investors who want reliable income and gradual appreciation rather than a rapid rise.
As of the date of publication, Ebube Jones had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
