Select dividend-paying water utility stocks make wonderful core long-term holdings for most investors. 

As I wrote in my introduction to 2021's article on this topic: 

All utilities provide products and services that are considered essential, which makes them much more immune to economic downturns than most other sectors. But water utilities provide the most essential product of all utilities: potable water for drinking and other uses. And the wastewater services provided by many water utilities are not very far behind on the essential scale.

For context, in 2021, the three best performers in the U.S. water utility stock group were Middlesex Water, California Water Service, and American States Water.

Three water drops falling into a body of water and causing ripples.

Image source: Getty Images.

Water utility stocks ranked by 2022 performance

In order to make this list, companies had to operate in the U.S., generate at least half of their 2021 revenue from water and wastewater utility operations, and their utility operations had to primarily be regulated.

The only company on the list that is far from a water utility pure play is Essential Utilities. Essential barely made this list, as in 2021, its revenue broke down as follows: 51% water and wastewater utility, 46% natural gas utility, and 3% other.

Company

Market Cap

Dividend Yield

Wall Street's Projected 5-Year Annualized EPS Growth

2022 Return

10-Year Return

Artesian Resources (ARTNA 0.09%) $551 million 1.9% 4%* 29.3% 259%
SJW Group (SJW -0.79%) $2.5 billion 1.7% 9.8% 13.3% 285%
York Water $642 million 1.8% 4.9%* (8.3%) 219%
American States Water $3.4 billion 1.7% 4.4% (8.9%) 380%
Essential Utilities (WTRG -0.03%) $12.5 billion 2.4% 6.8% (9%) 201%
California Water Service $3.3 billion 1.7% 11.7% (14.2%) 313%
American Water Works (AWK 0.85%) $27.7 billion 1.7% 8.3% (17.9%) 405%
Global Water Resources  $318 million 2.2% 15%* (20.3%) N/A**
Middlesex Water  $1.4 billion 1.6% 2.7%* (33.8%) 416%

S&P 500

-- 1.70% -- (18.1%) 232%

Data sources: YCharts and Yahoo! Finance. EPS = earnings per share. Data to Dec. 30, 2022. *Earnings estimates provided by only one or two analysts. **Held its initial public offering in 2016. Returns that have beaten the S&P 500 are boldfaced.

Below is a look at 2022's two best-performing water utility stocks. 

No. 1: Artesian Resources

Artesian Resources provides regulated water and wastewater utility services and related services throughout Delaware, and regulated water utility services and related services in two counties that border Delaware: Cecil County, Maryland, and Chester County, Pennsylvania.

For the first three quarters of 2022, Artesian's revenue rose 8.4% year over year to $73.8 million and its earnings per share (EPS) jumped 13% to $1.65. This growth was driven by a substantial increase in the number of residential wastewater customers stemming from the company's January 2022 acquisition of Tidewater Environmental Services, the start of industrial wastewater services in June 2021, and organic residential customer growth.

Given Artesian's strong revenue and earnings growth in the first nine months of 2022, it's not difficult to understand why its stock price has surged this year. But investors should not expect Artesian to continue to grow at such a pace over the long term. 

Now to a main reason many investors buy utility stocks: dividends. Artesian typically raises its quarterly cash dividend every six months. It has increased its dividend at least annually every year since the Great Recession, when it went a year and a half without a dividend increase from 2008 to 2009.

In 2022, the company raised its dividend twice, with both increases about 2%, which equated to an annual increase of 4.1%. In 2021, its two semiannual dividend hikes equated to a 4% annual raise. 

As a high-bar point of comparison, American Water Works, which is an industry standout with respect to recent annual dividend increases, raised its dividend by 9.5% in 2021 and 8.7% in 2022. (American Water is my longtime favorite company of the sector, thanks largely to its industry-leading size and geographic diversity, which give it a competitive advantage in acquisitions.) 

No. 2: SJW Group

SJW Group primarily operates as a regulated water and wastewater utility serving parts of California, Texas, Connecticut, and Maine. The California-based company expanded its operations to the East Coast via its 2019 acquisition of Connecticut Water, which added Connecticut and Maine to its service territory.

SJW stands for San Jose Water, which is the company's flagship business and remains its largest utility operation. It provides water service to about 1 million people in the San Jose metropolitan area. 

SJWTX provides water service to about 59,000 people in Texas, the Connecticut Water Company provides water service to more than 360,000 people and wastewater service to more than 10,000 people, while the Maine Water Company provides water service to a population of more than 80,000.

SJW Group also has a real estate operation called SJW Land Company. This business "owns commercial buildings, other undeveloped land primarily in the San Jose metropolitan area, a property in each of Florida, Texas, Arizona, Tennessee, and Connecticut, and a 70% limited partnership interest in a three-story office building ... in downtown San Jose," according to SJW Group's website.

In the first three quarters of 2022, SJW Group's revenue rose 3.5% year over year to $449.3 million. Utility operations and real estate rental income contributed 99% and 1%, respectively, to revenue. Reported EPS declined 7% to $1.33, while EPS adjusted for one-time items fell 5% to $1.30.

SJW Group has increased its quarterly cash dividend for the past 54 consecutive years. In 2021 and 2022, it raised its annual dividend by 6.3% and 5.9%, respectively.