WTRG - Essential Utilities: A Buy Below $40/Share

• Essential Utilities delivered a solid 7% dividend increase in August, which along with the payout ratio indicates the sustainability of the dividend going forward.
• Despite a challenging operating environment, Essential Utilities experienced a mere 0.9% YTD YoY decline in adjusted income/share.
• Unfortunately, shares of Essential Utilities are trading at a 16% premium to fair value.
• Between its 2.2% yield, 6.0-7.0% annual earnings growth potential, and 1.5% annual valuation multiple contraction, shares of Essential Utilities aren't quite attractive enough to warrant a buy rating.
• With a 2.5% yield and the same 6.0-7.0% annual earnings growth potential, I would rate shares of Essential Utilities as a buy given the steady nature of the utility.

For further details see: