American Water Works

Water is the one expense almost nobody skips, and that gives American Water remarkable pricing power. A typical home spends under 1 percent of its income on water, so steady rate increases barely register. Revenue grew almost 10 percent last year to 5.1 billion dollars, driven by approved rate cases that lifted authorized revenue by about 264 million dollars in a single year.

This company has raised its dividend every single year for 18 years straight, most recently bumping it 8.2 percent. Management targets 7 to 9 percent annual earnings growth through 2030, backed by 19 to 20 billion dollars of planned infrastructure investment that regulators let them earn a near 10 percent return on. A pending merger with Essential Utilities would create the largest public water utility in the country.

Replacing aging pipes is enormously expensive, and American Water funds it with heavy borrowing and occasional new share sales. The company carries over 15 billion dollars in net debt, so when interest rates rise its costs climb and earnings feel the squeeze. A billion dollar stock sale last summer also diluted existing owners.

Every price increase needs a regulator's approval, and there is no guarantee they say yes. The big merger with Essential Utilities still needs sign-off from several states and federal antitrust review, and it is not expected to close until early 2027. If that deal falls apart, American Water would owe an 835 million dollar termination fee.