Two days before its Q1 earnings call, American Water Works (NYSE:AWK) has announced that it's boosting its dividend 12% to $0.28 per share.
While welcome, this latest news should come as no surprise to investors. Since its 2008 IPO, American Water has increased its dividend every year for an overall 40% increase over the company's initial $0.20 distribution.
"Last year American Water committed to establishing dividends that are more aligned with our financial performance," said President and CEO Jeff Sterba in a statement. "On a compounded basis, our annualized earnings have increased by 14 percent from 2010 to 2012. This dividend increase is in recognition of this earnings momentum and demonstrates our commitment to striking the right balance between increased dividend payouts to shareholders and continued proactive investment in our systems on behalf of our customers."
According to American Water, the "right balance" is linked to EPS growth and targets a payout ratio between 50-60% of net income. The new dividend will be payable on June 3 to shareholders of record as of May 24.
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.