Outperforming the market, shares of Aqua America (NYSE:WTRG) rose 31% in 2017 as opposed to the S&P 500 (SNPINDEX:^GSPC), which climbed a not-too-shabby 19%. This comes much to the delight of investors who witnessed a less-encouraging 2016, when shares inched a meager 0.8% higher, underperforming the 9.5% gain in the S&P 500.

Although the company hasn't released fourth-quarter earnings yet, it's clear that 2017 was a success. Let's dive in and take a look at what the company accomplished.

Woman jumping in front of the sea at sunset, celebrating 2017.

Image source: Getty Images.

Expecting to grow despite some ebb and flow

Aqua America's growth strategy since the early 1990s has been grounded in acquisitions. Demonstrating its success in this endeavor, Aqua America now has a customer base of 3 million -- a far cry from the company's humble beginnings in 1886 when it provided water services to Springfield Township in Pennsylvania. Addressing continued growth, management, during the company's Q4 2016 earnings presentation, announced its belief that the company would achieve 1.5% to 2% customer growth in 2017.

Evidently, Aqua America will fall short of this mark -- at the end of December, management reported its expectation that customer growth would equal 1% for the year. The company chalks up missing guidance to delays in the closing of two acquisitions -- now expected to occur in 2018 -- which the Pennsylvania Public Utility Commission has already approved. The delay shouldn't detract from the company's success in closing four other acquisitions and the announcement of an agreement inked at the end of December to acquire a Pennsylvania-based utility, representing 1,400 customers.

A rising tide 

Continuing its 72-year tradition of rewarding shareholders by paying consecutive quarterly dividends, Aqua America distributed $0.79 per share to investors in the form of dividends for 2017. With the increase in the payout, Aqua America's dividend has risen at a compound annual growth (CAGR) of 7.91% over the past five years. This figure becomes even more impressive when stacked up against its peer American Water Works (NYSE:AWK), the largest water utility by market cap, which has increased its dividend at a 6.01% CAGR over the same period.

Further illustrating the allure of Aqua America's dividend, the stock's year-end yield has averaged 2.33% over the past five years. American Water Works' stock, conversely, has averaged a 6.01% yield over the same period, according to Morningstar

Presumably, investors will need not worry that Aqua America is sacrificing its financial health to please investors. Although we can't calculate the payout ratio for 2017 since the company hasn't reported fourth-quarter earnings yet, we reasonably can be confident that management has been prudent in raising its dividend. 

Cupped together, two hands catch falling water.

Image source: Getty Images.

From fiscal 2012 through fiscal 2016, the company has averaged an annual payout ratio of 52.4%, according to Morningstar.

A year that was first-rate

In addition to acquisitions, the company relies heavily on rate increases for growth, since operations in regulated markets -- 97.6% of revenue in fiscal 2016 -- is the company's bread and butter. Unable to raise rates arbitrarily, Aqua America must file requests with utility commissions to ensure that the providing of water and wastewater services is a profitable undertaking.

In this area, Aqua America had a lot to celebrate in 2017. As of Oct. 31, the company completed rate and infrastructure surcharge requests in six of the eight states in which it operates. Combined, this represents an annualized revenue increase of $24 million. And this may not be the final amount for the year. Entering November, Aqua America had pending rate and infrastructure charge requests totaling $14 million.

Investor takeaway

Things went swimmingly for Aqua America in 2017. Though the company is sailing through some choppy waters regarding acquisitions, the challenges should be resolved in the coming year. Instead, proof of the company's commitment to returning cash to shareholders and success in receiving rate increases demonstrates that the company made quite the splash last year.

Wall Street, in particular, agreed. The company's stock received four upgrades from analysts throughout the year. Perhaps, the most notable nod came from an analyst at Argus, Jacob Kilstein, who raised his price target from $37 to $41, according to thefly.com. That's not too shabby considering the stock traded as low as $29.84 during the year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.