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Clean Water, Scarce Supply, and One Utility Stock Worth Watching

Hey there, bargain hunter.

Water is not a commodity. It is infrastructure. It is life. And right now, the world is running short on it faster than most investors realize.

The numbers are not subtle. The FAO’s 2025 AQUASTAT data shows that renewable water availability per person has dropped another 7% over the past decade. The World Bank released its first-ever Global Water Monitoring Report in November 2025, finding that the world loses 324 billion cubic meters of freshwater every year — enough to supply 280 million people. The World Economic Forum puts it plainly: global water demand is on track to outpace supply by 40% before 2030. About 4 billion people already face severe water scarcity for at least part of the year.

That backdrop matters. A lot. Because it tells you exactly why regulated water utilities are not cyclical bets — they are structural ones.

What WTRG Actually Does

Essential Utilities (NYSE: WTRG) is one of the largest publicly traded water and wastewater utilities in the United States. Operating under the Aqua and Peoples brands, it serves approximately 5.5 million people across nine states. The business is split between a regulated water and wastewater segment and a regulated natural gas segment through its Peoples Natural Gas operations.

The model is almost boringly simple. Regulators approve rates. Customers pay bills. Revenue flows in whether the economy is expanding or contracting. There is no demand elasticity worth speaking of — you cannot decide to skip water this quarter because inflation is high.

That is the entire pitch, and it holds up under scrutiny.

The Numbers

Full-year 2025 revenue came in at $2.47 billion, an 18.6% jump from $2.09 billion in 2024. Net income was $616.4 million, with GAAP EPS of $2.20 — up from $2.17 in 2024. Strip out the one-time gain on gas asset sales embedded in 2024, and the adjusted non-GAAP base was $1.97. From that base, the company is targeting 5% to 7% compounded annual EPS growth through 2027.

On the income side: WTRG has paid a consecutive quarterly cash dividend for over 80 years, and has raised its dividend 35 times in the last 34 years. The current quarterly payout is $0.3426 per share, with a forward yield sitting around 3.66%. Capital investment for 2025 was on track to exceed $1.4 billion for the year, consistent with a multi-year infrastructure push.

Slight tangent, but worth noting: the company’s weighted average cost of fixed-rate long-term debt was 4.02% as of Q1 2025, and it had $728 million in available credit lines. That is a healthy liquidity buffer for a capital-intensive regulated utility.

The Merger That Changes the Scale Entirely

In October 2025, Essential and American Water Works (NYSE: AWK) announced an all-stock, tax-free merger that would create a combined water and wastewater utility with a pro forma market cap of approximately $40 billion and a combined enterprise value of roughly $63 billion. The deal is expected to close by end of Q1 2027, pending regulatory approvals.

The combined company would serve approximately 4.7 million customers across 17 states, with a $28 billion combined capital investment plan over the next five years targeting pipe replacements, PFAS mitigation, and treatment upgrades. American Water’s long-term targets of 7% to 9% annual EPS and dividend growth are expected to carry over post-close.

The transaction recently received approval from the Public Utilities Commission of Ohio. Additional state regulatory reviews are still in process.

Bull, Base, Bear

• Bull: Merger closes on schedule, combined entity achieves 7%-9% EPS growth, PFAS regulatory tailwinds accelerate rate base expansion, dividend growth stays intact post-close.
• Base: Merger closes with minor divestitures, EPS growth tracks the lower end of guidance (5%-7% from the $1.97 non-GAAP base), dividend stays flat or inches up modestly during integration.
• Bear: Regulatory pushback delays or conditions the merger significantly, rising interest rates compress utility valuations broadly, PFAS compliance costs escalate faster than rate recovery allows.

The Cheap Investor Scorecard

• FY 2025 Revenue: $2.47B (+18.6% YOY) — confirmed
• FY 2025 GAAP EPS: $2.20 — confirmed
• Long-term EPS growth target: 5%-7% (WTRG standalone), 7%-9% (post-merger with AWK)
• Dividend yield: ~3.66% forward, $0.3426/quarter current payout
• Consecutive quarterly dividends: 80+ years; raised 35 times in 34 years
• Pending merger enterprise value: ~$63 billion combined with AWK
• Combined capex plan: $28 billion over 5 years post-merger
• Credit lines available: $728M as of Q1 2025
• Key risk: Multi-state regulatory approval timeline for AWK merger
• PFAS compliance: Active multiyear remediation plan underway

Here is where I land on this one. WTRG is not a growth stock. It is not supposed to be. What it is — in a world where freshwater availability is measurably declining, where municipal infrastructure is aging, and where regulators hand rate increases to utilities that invest in their systems — is a steady, defensible compounder attached to a resource that cannot be substituted.

The merger with American Water is either a significant value unlock or a multi-year integration headache. Probably some of both. But if it closes as structured, WTRG shareholders step into a much larger, better-capitalized entity with stronger dividend growth targets and a dominant position in U.S. regulated water infrastructure.

Watch the state-level regulatory approvals closely. That is the real gating factor between now and Q1 2027.

— The Cheap Investor