A look back at York Water Company
A year on, not much has changed about this secular dividend payer
About a year ago I analyzed the York Water Company YORW 0.00%↑, a water utility company that has been around and paying dividends since 1816.
At the time I thought the company was overvalued, likely as a result of their stellar track record of returning capital to shareholders, but it’s been a year and now it’s time to see whether anything has changed, and whether we now have a good entry point for this incredible business.
You can read the original analysis here:
The Thesis
The first thing we need to take into consideration is to see what I thought about the company, and what my thesis for the investment was:
Stable company that is unlikely to go bust anytime soon
Favorable regulatory environment
Simple and understandable business
Small and highly concentrated
Dividends will continue to be paid
How has this held up?
Let’s take it point by point:
Stable company that is unlikely to go bust anytime soon
This hasn’t changed, the company continues to pump out water to customers in the York and Adams counties, and the underlying business model has hardly changed since 1816.
This was pretty obvious, and unlikely to change.
Favorable regulatory environment
This is surprisingly true given the notorious issues with highly regulated utility companiies.
As of March 1st 2023 the company has increased rates, though partially offset by a reset to zero of the Distribution System Improvement Charge, which is a Pennsylvania Putblic Utility Commission allowed charge intended for the replacement of agin infrastructure.
Nonetheless the increased rates and some slight growth in the customer base has resulted in higher revenues, and subsequently earnings.
Simple and understandable business
Few things are simpler than providing water to consumers in terms of business models.
That doesn’t mean that there is no technological and logistical complexity in caputring, purifying and subsequently disposing of water (including wasterwater), but these are all fairly well established industries and technologies, and from an investor perspective a “Build infrastructure and then collect a fee from its use” is a well treaded path.
Small and highly concentrated
They remain a small business, focused on providing water in only 2 small counties in Pennsylvania.
With revenues of $60 million, this company would be a rounding error in some of my previous analysis.
Dividends will continue to be paid
And so they have, with a slight increase on Q4 2022 they are now paying $0.81 per share per year!
A nice inrease, but nothing out there.
The future
Overall I feel this company is the exact same as it was a year ago when I first saw it.
They are currently trading at $42 per share, and they were trading at around the same price when I first wrote my analysis.
They have gone nowhere, and nothing meaningful has changed for this business, and nothing is likely to change going forward given their track record.
I like the company, I would like to own it, but it’s just too expensive to justify at this time.
Maybe later.
My stance: HOLD
Do you own YORW 0.00%↑ ? Let me know what you think in the comments below!
Sleep well at night type of stock :)