Updated on July 10th, 2025 by Felix Martinez
California Water Service (CWT) has an impressive track record of increasing dividends to shareholders. CWT is part of the Dividend Kings, a group of stocks that have raised their payouts for at least 50 consecutive years.
You can see all 55 Dividend Kings here.
You can also download an Excel spreadsheet with the full list of Dividend Kings (plus important metrics such as price-to-earnings ratios and dividend yields) by clicking on the link below:
Impressively, CWT has paid 320+ consecutive quarterly dividends.
The Dividend Kings are the “best of the best” when it comes to rewarding shareholders with cash. This article will discuss California Water Service’s dividend, valuation, and outlook.
Business Overview
California Water Service is a water stock and the third-largest publicly owned water utility in the United States.
It was founded in 1926 and has six subsidiaries that provide water to approximately 2 million people in 100 communities, primarily in California but also in Washington, New Mexico, and Hawaii.
Like the vast majority of utility companies, California Water Service is a slow-growth company. Utilities spend excessive amounts on expanding and maintaining their infrastructure, accumulating high debt loads.
As a result, utilities rely on regulatory authorities to approve annual rate hikes. These rate hikes aim to help utilities service their debt, but they usually result in modest revenue and earnings growth. Regulatory authorities have an incentive to offer attractive rate hikes to utilities, encouraging them to invest in infrastructure.
On the other hand, authorities offer limited rate hikes to keep customers satisfied. The reliable rate hikes that utilities enjoy result in a resilient business model characterized by fairly predictable cash flows and earnings growth.
This is clearly reflected in California Water Service’s exceptional record of dividend growth. The company has raised its dividend for 58 consecutive years and projects a payout ratio of 51% for 2025.
Source: Investor Presentation
We expect the company to grow its earnings per share by 5% over the next five years and to achieve $2.35 per share in earnings in 2025.
Growth Prospects
As mentioned above, utilities rely on modest rate hikes from regulatory authorities year after year, and thus, they are mainly characterized as slow-growth stocks. California Water Service is no exception, having grown its earnings per share at a 6.9% average annual rate over the last decade.
We expect the company to grow its earnings per share by an average of 5% per year over the next five years. Continued rate hikes will be one major driver of earnings growth.
Earnings growth should be achievable in the long run, thanks to the rate hikes regularly approved by relevant authorities and regulators.
Regulators must continuously encourage the company to keep investing in expanding and maintaining its network.
Customers are dependent on high–quality infrastructure that will remain reliable in the future, which is why future rate increases are almost a given.
Another growth catalyst for California Water Service is acquisitions. Companies in many industries, including utilities, generate inorganic growth by simply acquiring new customers.
Source: Investor Presentation
Overall, we expect California Water Service to grow its earnings per share at an average annual rate of 5% over the next five years, which is roughly in line with its historical long-term growth rate.
Competitive Advantages & Recession Performance
Utilities invest enormous amounts in maintaining and expanding their networks. These investments result in high debt, but they also form extremely high barriers to entry for potential competitors.
New competitors cannot enter the markets in which California Water Service operates. Overall, utilities have the widest business moat investors can hope for.
In addition, while the vast majority of companies suffer during recessions, water utilities are among the most resilient companies during such periods, as economic downturns do not affect the amount of water customers consume.
The resilience of California Water Service was evident in the Great Recession. Its earnings-per-share during the Great Recession are below:
- 2007 earnings-per-share of $0.75
- 2008 earnings-per-share of $0.95 (27% increase)
- 2009 earnings-per-share of $0.97 (2% increase)
- 2010 earnings-per-share of $0.90 (7% decrease)
Therefore, not only did California Water Service not incur a decrease in its earnings during the Great Recession, but it grew its earnings per share by 20% throughout the 3-year period of 2007-2010. That performance was in sharp contrast to the performance of the vast majority of companies, which saw their earnings collapse during the Great Recession.
California Water Service’s exceptional resilience was also evident in the 2020 economic downturn caused by the coronavirus pandemic. While most companies incurred a material decrease in earnings during this period, California Water Service grew its earnings per share by a staggering 50% in 2020.
California Water Service is one of the most resilient companies during recessions and bear markets.
Valuation & Expected Returns
California Water Service is expected to generate earnings per share of $2.35 this year. As a result, the stock is currently trading at a price-to-earnings ratio of 19.8. This is a fair valuation multiple for a utility stock, which is typically characterized by slow growth. We consider 20.0 to be a fair earnings multiple for this stock.
If California Water Service reverts to our assumed fair price-to-earnings ratio of 20.0 over the next five years, it will incur a 1.0% annualized tailwind in its returns. This could help with the positive returns of earnings-per-share growth and dividends.
The stock offers a dividend yield of 2.6%, about double that of the S&P 500.
Through the combination of expected earnings-per-share growth, valuation changes, and dividends, we believe California Water Service is likely to offer an average annual total return of 8.6% over the next five years.
Final Thoughts
California Water Service has consistently demonstrated exceptional dividend growth, thanks to its reliable earnings growth, which is supported by rate hikes approved by regulatory authorities.
In addition, thanks to its healthy payout ratio and solid business model, the company should easily continue raising its dividend at a mid-single-digit rate for many years to come.
While California Water Service is a “boring” stock, it is exceptionally resilient during recessions. When most companies see their earnings collapse, California Water Service provides a haven to investors.
As a result, we currently rate this utility as a hold due to the low expected total return over the next five years.
Additional Reading
The following databases of stocks contain stocks with very long dividend or corporate histories, ripe for selection for dividend growth investors.
- The Dividend Aristocrats List: S&P 500 stocks with 25+ years of dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
- The Best DRIP Stocks: The top 15 Dividend Aristocrats with no-fee dividend reinvestment plans.
- The High ROIC Stocks List: The top 10 stocks with high returns on invested capital.
- The High Beta Stocks List: The 100 stocks in the S&P 500 Index with the highest beta.
- The Low Beta Stocks List: The 100 stocks in the S&P 500 Index with the lowest beta.
- The Complete List of Russell 2000 Stocks
- The Complete List of NASDAQ-100 Stocks