Middlesex Water Company Is Dull, Solid, And Pays A 3.5% Dividend
Middlesex Water Co. pays a 3.5% annual dividend. It operates in the financially well-off states of New Jersey, Delaware, and Pennsylvania. Its income should see little disruption due to economic conditions. Water supply and wastewater treatment have relatively low energy requirements, so MSEX should not lose lots of income when energy prices eventually rise. MSEX has been in business since 1897, so your money should be relatively safe here; and MSEX will pay you to wait for a recovery if necessary. “The Middlesex Water Company (NASDAQ: MSEX ) owns and operates regulated water utility and wastewater systems in New Jersey, Delaware, and Pennsylvania. It also operates water and wastewater systems under contract on behalf of municipal and private clients in New Jersey and Delaware. These states all rank in the top half of the median household income for US states. New Jersey is number three. Delaware is number eleven. Even in a downturn MSEX’s customers should not be hard put to afford their bills. MSEX’s income stream is probably as solid as you can possibly get. Even in a downturn, you still need to do dishes, laundry, drink water, use the bathroom facilities, etc. If there is a downturn, MSEX pays a stable 3.5% annual dividend. MSEX will pay you to wait for the stock price to recover, if it falls. Further MSEX probably will not fall as far as most stocks even in a downturn. It has a Beta of 0.70; and it has a debt rating of Stable A- from S&P. Further, it does not have the “not green enough” or “too dangerous” problems that electricity generating utilities have due to coal power plants or nuclear power plants. The Middlesex Water Company has also been performing solidly financially for years. The charts below give investors a good idea about this. The trend upward in operating revenues, net income, EPS, and dividends has been very strong since 2011. The increase in the dividend has been steady; but the percentage has only approximately equaled the rate of inflation from 2011-2014. This is mildly disappointing. However, the 2014 EPS of 1.13 gives investors hope that the company may eventually increase the now $0.77 per share annual dividend by a larger amount than the $0.01 per year increases of the last five years. In Q1 2015, MSEX continued to build upon its strong and steady growth. Consolidated operating revenues increased 5.9% year over year ( $28.8 million versus $27.2 million). Net Income rose 14.7% ($3.6 million versus $3.1 million in Q1 2014); and EPS were up 10% year over year ($0.22 versus $0.20 in Q1 2014). MSEX also raised the dividend on April 24, 2015 to $0.1925 per common share per quarter ($0.77 per common share annually from $0.76). Revenues from the Middlesex System in New Jersey increased $0.6 million due largely to a rate increase approved by the New Jersey Board of Public Utilities (and implemented in July 2014). Revenues from MSEX’s Delaware System, Tidewater Utilities Inc., increased $0.7 million primarily due to greater customer demand. Revenues from contract operations increased $0.4 million year over year. MSEX hasn’t let the grass grow under its feet in 2015. On April 1, 2015 it filed a request with the New Jersey Board of Public Utilities for a rate adjustment of about 13.53% in water rates for its Middlesex System in New Jersey. This was to recover costs for repairs and upgrades to its drinking water infrastructure as well as for increased costs in chemicals, fuel, electricity, technology, taxes, labor, benefits, and other factors impacting operating income. Continued diligence with respect to expenses should help MSEX remain highly profitable. It has also had higher expenses. Operating and maintenance expenses increased $0.7 million in Q1 2015 year over year. Employee Benefit Expenses increased $0.7 million year over year. This was mostly due to longer life expectancies. Various other costs increased or decreased. However, MSEX seems to be managing this all well. It seems to have a good team; and it should be a safe investment. It is a buy. The fact that most utilities have retreated considerably recently should only make MSEX more attractive. See the five-year chart below of the Utilities Select Sector SPDR ETF (NYSEARCA: XLU ). (click to enlarge) As investors can see, the sector has fallen about 10% in stock price recently. Many people believe this may have been due to the interest rate (rise) scare due to the Grexit threat. Given the relative strength of the XLU uptrend, this may be a good buying opportunity for utilities in general. The five-year chart of MSEX provides some technical direction for a trade/investment in this specific stock. (click to enlarge) Although a bit bumpier, the MSEX chart shows the same strong uptrend as the sector chart. Further, a good water utility is about as safe a bet as you can make. MSEX has proven it is a good one. Investors should be able to invest in it with confidence. Its 3.5% dividend should pay you nicely to wait for a recovery from any future pullback(s) there may be. People always need water; and it is becoming an increasingly scarce commodity with global warming and greater populations. MSEX is a solid holding. It has increased its dividend for 42 consecutive years . There has been a small amount of insider buying in the last six months. It has met or exceeded EPS estimates each of the last four quarters. MSEX is a buy. NOTE: Some of the fundamental fiscal data above is from Yahoo Finance. Good Luck Trading/Investing. Disclosure: The author has no positions in any stocks mentioned, but may initiate a long position in MSEX over the next 72 hours. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.