Uncover the Hidden Gem: Artesian Resources Corporation (ARTNA) – A Dependable Dividend King Amidst Low Mainstream Interest
Delve into the world of small-cap water utility, Artesian Resources Corporation, which has been consistently delivering dividends to its investors for over 28 years. With a focus on providing high-quality water and eco-friendly wastewater solutions, this company serves approximately 301,000 customers annually, accounting for 8.8 billion gallons of water. Despite its impressive track record, Artesian Resources remains underappreciated by mainstream investors. Let us examine its dividend safety and capital appreciation prospects to ascertain its value as a long-term investment opportunity.
Understanding Artesian Resources Corporation
Founded more than 115 years ago, Artesian Resources Corp.’s primary objective has remained constant—to supply top-notch water, cutting-edge wastewater services, and excellent customer care. Based in Northern Delaware, this regional water utility boasts a robust infrastructure capable of meeting diverse consumer needs.
Water utilities have garnered attention due to their steady performance over time, making them ideal for building lasting wealth. Many of America’s longest-running dividend aristocrats hail from this industry, even though it may be perceived as mundane compared to others. For instance, The Conservative Income Investor highlighted two prominent instances where seemingly dull water utility firms generated remarkable returns:
- Connecticut Water Service Inc., up 500%+ since 2000
- California Water Services Group, surging nearly 1000% within the last 20 years
Although increasing interest rates impacted water utilities such as The York Water Company, American States Water Co., and Artesian Resources Corp., ARTNA presents itself as the most affordable among the trio, accompanied by an attractive starting yield of 3.13%. Consequently, let’s explore the fundamental aspects of Artesian Resources Corporation.
Fundamentals of Artesian Resources Corporation
As of February 2023, shares of Artesian Resources were priced above $61 each. However, recent market shifts offer investors a chance to acquire the firm for under $39 per share. Due primarily to soaring interest rates, institutional investors divested from utility stocks, favoring safer alternatives like Treasury bonds instead. Currently, ARTNA trades at a P/E ratio of 18.75, significantly lower than the broader market’s. Moreover, its 3.13% starting yield represents an appealing incentive for prospective buyers.
Beyond just an enticing initial yield, Artesian Resources also demonstrates stable dividend growth, having increased its payouts steadily for 28 consecutive years. Its five-year CAGR stands at 3.59%, backed by a secure dividend coverage ratio of 50.45%. Such strong fundamentals suggest further scope for regular dividend growth.
Why Consider Artesian Resources?
There are two compelling factors supporting an investment in Artesian Resources Corporation:
- Reliable Dividend Income Stream: Offering a sizable 3.13% starting yield, ARTNA ensures consistent passive income generation. Furthermore, being part of the essential utility sector implies minimal disruption risk arising from either geopolitics or technology advancements. Hence, investors can expect predictable revenue streams provided consumers maintain their demand for clean water supplies.
- Capital Appreciation Potential: Given its depressed pricing following unfavorable market conditions, Artesian Resources Corp. presents an intriguing turnaround story. Eventually, the broader economic cycle should lead to renewed interest in undervalued utility stocks, including ARTNA, unlocking substantial capital gains opportunities.
Final Thoughts
Despite lacking excitement surrounding its dividend growth metrics, Artesian Resources exhibits resilience through recessionary periods due to persistent consumer demands. While presently attractively valued, prudent investors must remain patient before diving headfirst into this opportunity. Nevertheless, considering its proven reliability and untapped recovery potential, keeping tabs on ARTNA might prove advantageous for those seeking a sturdy dividend play.
Please note: This analysis does not constitute financial advice and encourages individual research prior to investing.