Utility bills are just one of those little annoyances of life. Everybody complains about the cost of power, water and cable, but they keep paying the bills because nobody really wants to go back to living 1890s style.

That sort of stability is good if you're a utility company. As the largest American-owned water utility, Aqua America (NYSE:WTR) has a positive record of slowly improving operations and building the business through acquisitions.

Operating revenue in the first quarter grew just over 14%. Although water volumes were fairly weak in the quarter (due to wet weather), new rate increases kicked in, and Aqua America also benefited from the contributions of acquisitions closed in 2004.

Aqua America also made progress with its operating efficiency. The company's operating margin improved by 1% -- moving to 37.5% from 36.5%. Another metric the company uses, operations and maintenance expense relative to revenue, improved by about 40 basis points.

Acquisitions are a key component of Aqua America's growth strategy, and the company had completed 11 acquisitions by early May. Management is maintaining its target of 25 to 30 acquisitions for the full year -- on par with last year's 29 acquisitions and above the five-year average of roughly 18 a year.

Looking at the rest of the year, attempts to secure rate increases will remain important in building future growth. Increases approved last year will continue to benefit the company this year, and Aqua America has filed for several increases around the country, including potentially large amounts in Pennsylvania and North Carolina.

Investors looking at Aqua America need to consider two significant risk factors. First, Aqua America does not control its pricing: It needs to appeal to state regulatory bodies to secure higher rates, and it doesn't always get everything it requests.

Secondly, Aqua America consumes cash. Ongoing acquisitions demand the company's resources, as do capital spending and system maintenance. Looking at owner earnings (net income plus depreciation minus capital spending), it has been many years since the company was in the black, and the gap has grown larger over the past three years.

That said, the company carries a good debt rating and has not had much trouble supplementing its cash needs with borrowing. What's more, while Aqua America doesn't yield as much as investors might expect from a utility, the company has a 60-year history of paying dividends and has raised dividends 14 times in the last 13 years.

While the price-to-earnings ratio on these shares may make some investors blanch, water is a good business for the long haul. Aqua America can continue to make profitable acquisitions of smaller entities while operating improvements and rate increases fuel low double-digit earnings growth and stable dividend growth.

Water, water, everywhere, and all the Fools did drink:

Mathew Emmert recommends companies paying large dividends in Motley Fool Income Investor. You can find out more by taking a no-obligation free trial.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).