Smart Dividend Portfolio Edition #57: Flowing Dividends
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Dear Investor,
Welcome to the 57th edition of TipRanks’ Smart Dividend Portfolio & Newsletter.
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Market-Moving News: April 21, 2025
Stocks wrapped up another volatile week with mixed results. The S&P 500 (SPX) gained 0.28%, while the Dow Jones Industrial Average (DJIA) ended the week with a loss of 1.14%. The tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) fell by 0.62% and 0.47%, respectively. On Thursday – the week’s last trading day before closing for Good Friday – the main stock indexes moved in different directions. The S&P 500 managed to edge higher by 0.13% despite slumping in the last hour of trading on President Trump’s threats to fire Fed Chair Jerome Powell. Meanwhile, the blue-chip DJIA dropped by 1.33%. The 1.46% difference in the indexes’ daily results was the largest such divergence since at least 1982.
The primary driver of this divergence was a 22% tumble in UnitedHealth stock following its disappointing guidance. Although 20 out of the 30 Dow components actually rose on Thursday, the DJIA’s price-weighted structure left it susceptible to an outsized impact of a single stock’s drop.
At the same time, the S&P 500 benefited from its wide internal diversification, registering modest gains as investors – including the institutional ones – bought the dip after Trump backpedaled on his most punitive tariffs and signaled willingness to negotiate with the U.S. trading partners.
Meanwhile, the Nasdaq Composite and Nasdaq-100 fell over the second half of the clipped week, driven down by a renewed slump in semiconductor stocks following enhanced restrictions on exports to China. The tariff theme apparently continues to sway the market’s direction, with the uncertainty running high.
Economists warn that tariffs could cause a recession if fully implemented and remain in place for some time. Although Trump signaled that trade negotiations with several countries could lead to lower tariffs, reigniting Wall Street hopes, the on-again-off-again rollout of the levies could also damage the economy. The notable drop in consumer sentiment and a surge in household inflation expectations are a testament to the extent of harm caused by the lack of policy clarity.
Meanwhile, Federal Reserve Chair also contributed to the dampening investor sentiment. Jerome Powell reiterated that the Trump administration’s tariffs are “significantly larger than anticipated,” threatening to slow the economy and raise inflation further. At the same time, he continued to emphasize the Fed’s preference to “wait for greater clarity” on the impact of policy changes.
While stock market declines are not generally seen as a cause for the central bank to step in and cut interest rates, this “wait and see” approach is now drawing fire from different directions – not to mention President Trump’s dissatisfaction. Many analysts and strategists are now wondering whether the Fed is already behind the curve, refusing to act only to be forced into stronger actions later by the unforgiving reality.
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This Week’s Quality Dividend Stock Idea
Essential Utilities (WTRG) is a regulated utility company specializing in water, wastewater, and natural gas services. Its operations span water supply, wastewater treatment, natural gas distribution, and utility service line protection. Through its Aqua and Peoples brands, WTRG serves approximately 5.5 million people in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, Virginia, and Kentucky.
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Utility Evolution
Essential Utilities, originally founded as Aqua America in 1886, began as a Pennsylvania-based water utility. Over its 139-year history, the company has evolved into a diversified utility provider through strategic acquisitions, infrastructure investments, and operational optimization. A defining milestone occurred in 2018 with the $4.3 billion acquisition of Peoples Gas, a natural gas distributor. This transformative deal expanded Essential’s portfolio beyond water and wastewater and into natural gas, prompting its rebranding as Essential Utilities in 2020.
Acquisitions have been a cornerstone of Essential’s growth strategy. Since 2015, the company has added nearly 129,000 wastewater customers and secured agreements to serve an additional 213,000 through different deals. Notable transactions include the $18 million acquisition of the Greenville wastewater system in 2025, leveraging Pennsylvania’s new fair market value regulations, and a $276.5 million agreement to acquire the Delaware County Regional Water Quality Control Authority (DELCORA), expected to generate $17 million in incremental annual earnings.
Currently, the company has six pending acquisitions in Pennsylvania, Texas, and Ohio, which are expected to add over 210,000 equivalent customers and come at a cost of more than $344 million in purchase price. This includes the agreement to acquire DELCORA. Excluding DELCORA, another $67.8 million in deals are in the regulatory approval pipeline.
These moves have strengthened Essential’s regulated water and gas segments, with 2024 regulatory rate awards boosting annual revenues by $53.9 million for water services and $93.9 million for natural gas operations. Rate awards or infrastructure surcharges help utility companies recover costs from major infrastructure upgrades and are often implemented to address regulatory lag or rapid changes in expenses. They ease “rate shock” and lessen the financial burden on consumers.
Beyond acquisitions, Essential has prioritized infrastructure upgrades to ensure reliable service and compliance with environmental standards. Strategic divestitures, such as the approximately $40 million sale of its West Virginia gas utility assets in 2023, have streamlined operations by focusing resources on high-growth regions. These efforts have driven consistent earnings growth, positioning Essential as a leader in the utilities sector.
Today, Essential Utilities, headquartered in Bryn Mawr, Pennsylvania, is a key player in the utility sector with a market capitalization of $11 billion.
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Blueprint for Stability
Essential Utilities operates a stable, regulated utility model delivering essential water, wastewater, and natural gas services across nine U.S. states. Its revenues are primarily derived from regulated segments, totaling $1.22 billion from water and $843 million from natural gas in 2024. This revenue structure is anchored in state-approved rate mechanisms that ensure cost recovery and provide a return on investment, delivering predictable and stable cash flows.
Aqua Pennsylvania, a key subsidiary, accounted for 55% of the company’s operating revenues in 2024. Residential customers made up 67% of water and wastewater revenues, with demand peaking in the summer months. On the gas side, the Peoples subsidiaries serve 745,000 customers — 95% of them in western Pennsylvania. Metered billing aligns with seasonal heating needs, capturing usage spikes during colder months. Beyond its core regulated operations, Essential also operates non-regulated subsidiaries that offer utility line protection and gas marketing, adding diversification to its business model.
In 2024, WTRG invested over $1.3 billion in infrastructure upgrades to improve safety, reliability, and regulatory compliance. A significant portion of this investment addressed new U.S. Environmental Protection Agency (EPA) regulations setting maximum contaminant levels for PFAS (per- and polyfluoroalkyl substances) in public water systems. Noncompliance with these standards carries substantial penalties. That year, Essential completed PFAS mitigation work at 13 plants and began marketing its patent-pending treatment solution to other utilities, with the aim of generating additional revenue.
The company is also reducing risk in its natural gas segment through the deployment of advanced gas meters designed to enhance system safety. In parallel, Essential is exploring load growth opportunities tied to the data center sector within its natural gas service territory, including discussions involving up to 5 gigawatts of potential power generation.
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Steady Flow
Over the past five years, Essential Utilities has delivered strong financial performance, with revenue and earnings growing at compounded annual rates of 18.6% and 15.8%, respectively. This growth has been fueled by strategic acquisitions, most notably the 2020 merger of Aqua and Peoples, which expanded the company’s operational footprint and diversified its utility services. The integration has led to a broader customer base, improved scale efficiencies, and stronger revenue generation.
In FY24, WTRG reported revenues of $2.1 billion, up 1.6% year-over-year, while adjusted EPS rose 17% to $1.97. The growth was driven primarily by a 5.9% increase in regulated water revenues, supported by higher volumes and favorable rate awards. In Q4, EPS surged 34% year-over-year to $0.67, beating consensus estimates, while revenues climbed 26.1% to $604.4 million but came in slightly below expectations. Higher depreciation and interest expenses partly offset top-line growth.
For FY25, the company reaffirmed EPS guidance of $2.09 at midpoint and projects its EPS to grow at a CAGR of 5% to 7% through 2027. Capital investments are expected to total $1.4 billion to $1.5 billion in 2025, with plans to invest $7.8 billion from 2025 to 2029 to modernize systems and meet compliance needs. With a projected 8% CAGR in its combined regulated utility rate base and annual customer growth of 2% to 3% for its water services, the company is poised for sustained earnings growth. To fund these efforts, WTRG plans to raise $315 million in equity in 2025.
As WTRG prepares to announce Q1 results on May 12, its focus on acquisitions, infrastructure, and regulatory compliance allows for a robust outlook.
The company’s debt-to-equity ratio stands at 1.24, above the industry median of 0.89, reflecting the capital-intensive and regulated nature of the utility business. Its regulated model ensures predictable cash flows, supporting debt payments and earning investment-grade ratings of “Baa2” from Moody’s and “BBB+” from S&P. An interest coverage ratio of 2.9 reflects adequate earnings to cover interest, though it leans toward the lower end for utilities. Additionally, strong returns with ROE of 9.8%, ROA of 3.4%, and ROIC of 4.6% place it in the top 40% of its industry, underscoring disciplined capital management.
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Dividend Legacy
In 2024, Essential Utilities increased its quarterly dividend by 6% to $0.33 per share, marking the 33rd consecutive year of dividend growth, a testament to its commitment to shareholder returns. Over the past five years, the company’s dividend has grown at a CAGR of 6.9%, rewarding shareholders. With a current yield of 3.2%, WTRG’s dividend stands above the utilities sector average of 2.9%, offering an attractive income opportunity for long-term investors.
The company’s payout ratio of about 65% indicates that dividends are well covered by earnings. This provides Essential with the flexibility to maintain dividend growth while investing in infrastructure and strategic acquisitions. Management has targeted a long-term payout ratio between 60% and 65%, striking a balance between rewarding shareholders and funding future growth. As of today, WTRG does not have any active stock buyback programs, signaling a clear prioritization of dividend stability and capital reinvestment.
Over the past 12 months, WTRG stock has gained nearly 13%, driven by strong financial performance, regulatory tailwinds, and sustained infrastructure investments. The company is also benefiting from successful M&A execution and disciplined capital management. WTRG currently trades at a Non-GAAP P/E ratio of 20.3x, slightly above the utilities sector median of 19.6x, but this multiple represents a discount of about 16% to its own historical average. Compared to its peers, WTRG sits in the middle of the valuation range, despite paying higher dividends than most comparable companies in the regulated water and gas distribution industry. Moreover, when factoring in discounted future cash flows, the stock appears to be undervalued by over 30%.
Wall Street sentiment remains upbeat, with analysts citing the company’s strong balance sheet, long-term growth strategy, and robust capital expenditure plans as catalysts. Many analysts forecast further upside, with 12-month price targets suggesting a potential gain of up to 16%, especially as acquisition momentum builds in key territories like Pennsylvania.1
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Investing Takeaway
Essential Utilities offers a compelling dividend profile backed by a stable, regulated business model and a 33-year track record of dividend growth. With a current yield above the utilities sector average and a conservative payout ratio, the company provides consistent income with room for future increases. While WTRG does not engage in share buybacks, its focus on dividend reliability and capital expansion makes it attractive for long-term, income-focused investors. As Essential continues to grow its rate base through strategic acquisitions and regulatory rate approvals, its dividend is likely to remain well-supported and to enjoy steady growth.
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Dividend Investor Portfolio
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Portfolio News
▣ Sandoz has filed an antitrust lawsuit against Amgen (AMGN) in the U.S., accusing it of unlawfully maintaining its Enbrel drug’s market dominance by acquiring and using certain patents to block biosimilar competition, including Sandoz’s own etanercept biosimilar, Erelzi. Erelzi was approved by the FDA in 2016 but remains off the U.S. market due to Amgen’s actions, despite being launched in Europe the same year. Enbrel, used to treat chronic inflammatory diseases, generated $3.3 billion in U.S. sales in 2024 for AMGN. Sandoz seeks an injunction, damages, and swift market entry for Erelzi.
▣ IBM (IBM) is expected to announce its Q1 results on April 23. Analysts estimate earnings per share of $1.42, down 15.5% year-over-year, on revenue of $14.4 billion, representing a modest 0.5% increase from the same period in the prior year. Revenue growth is expected to be driven primarily by the company’s software segment, reflecting a strong focus on expanding this area. However, the company remains vulnerable to discretionary spending, which is likely to face pressure this quarter.
▣ LyondellBasell (LYB) is expected to announce its Q1 results on April 25. Analysts expect earnings of $0.44 per share, reflecting a 41.3% sequential decline, on revenue of $7.5 billion, down 21.1% from the previous quarter. The weak outlook is primarily due to concerns about U.S. polyethylene margin compression, as tariff impacts threaten to reduce exports and create a significant supply glut in the domestic market. Additionally, cold weather and operational outages could lead to a softer Q1 performance than previously anticipated.
▣ PepsiCo (PEP) is expected to announce its Q1 results on April 24. Analysts project earnings of $1.50 per share, down 23.5% sequentially, on revenue of $17.7 billion, a 36.3% decline from the previous quarter. The weaker outlook is attributed to softer consumer demand and reduced reordering by retailers. Additionally, growth at Frito-Lay North America is expected to remain below its long-term trend this year. While international segments are expanding and contributing significantly to sales and profit growth, they have not yet offset the slower performance of the North American snacks division.
▣ Philip Morris (PM) is expected to announce its Q1 results on April 23. Analysts expect the tobacco giant to post earnings of $1.61 per share, up 7.3% year-over-year, on revenue of $9.1 billion, marking a 3.8% increase from the prior year. Overall, analysts remain bullish on the stock, citing a strong long-term growth outlook for its multi-category smoke-free portfolio. Products like Zyn and the rise in users opting for smoke-free products are expanding nicotine consumption occasions, supporting the company’s growth trajectory.
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Recent Trades
None at the moment, although we are considering adding a stock to our portfolio when the market conditions allow for an attractive entry point. Stay tuned.
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Portfolio Attributes
| Dividend Portfolio Yield |
Expected Dividend Growth | Expected Annual Income |
| 4.00% | +8.19% | $5,924.69 |
| Yield-on-Cost Adjusted, Weighted |
Average Analyst 12-Month Growth Outlook | 10K Per Stock at the Time of Purchase |
Current Portfolio
| Name | EX-Dividend Date | Payment Date | Yield on Cost | Annual DPS |
| Automatic Data Processing (ADP) | Jun 12, 2025 | Jul 01, 2025 | 2.46% | $6.16 |
| Allianz SE ADR (ALIZY) | May 09, 2025 | May 28, 2025 | 6.09% | $1.52 |
| Amgen (AMGN) | May 16, 2025 | Jun 09, 2025 | 3.27% | $9.52 |
| BlackRock (BLK) | Jun 09, 2025 | Jun 26, 2025 | 2.61% | $20.84 |
| Bank of Nova Scotia (BNS) | Jul 03, 2025 | Jul 29, 2025 | 5.98% | $2.97 |
| EOG Resources (EOG) | Jul 17, 2025 | Jul 31, 2025 | 3.06% | $3.90 |
| IBM (IBM) | May 09, 2025 | Jun 10, 2025 | 3.13% | $6.68 |
| JPMorgan Chase (JPM) | Jul 08, 2025 | Jul 31, 2025 | 3.2% | $5.60 |
| Kroger (KR) | May 15, 2025 | Jun 02, 2025 | 2.82% | $1.28 |
| LyondellBasell (LYB) | Jun 03, 2025 | Jun 10, 2025 | 5.62% | $5.36 |
| PepsiCo (PEP) | Jun 09, 2025 | Jun 26, 2025 | 3.64% | $5.44 |
| Philip Morris (PM) | Jun 23, 2025 | Jul 17, 2025 | 6.06% | $5.40 |
| Qualcomm (QCOM) | May 29, 2025 | Jun 26, 2025 | 2.36% | $3.56 |
| VICI Properties (VICI) | Jun 18, 2025 | Jul 03, 2025 | 5.22% | $1.73 |
| ExxonMobil (XOM) | May 14, 2025 | Jun 10, 2025 | 3.64% | $3.96 |
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Click here for more stock market analysis from TipRanks Macro & Markets research analyst Yulia Vaiman
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Disclaimer
The information contained in this article represents the views and opinions of the writer only, and not the views or opinions of TipRanks or its affiliates and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy, or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment, and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices, or performance.
