Dividend Kings In Focus: H2O America

Updated on July 13th, 2025 by Nathan Parsh

Companies that have at least 50 years of dividend growth are considered Dividend Kings. These stocks are some of the most widely owned and followed stocks among income investors.

You can see the full list of 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:

You might be surprised to find that some small-cap names have also raised their dividend for at least the past 50+ years. One such company is H2O America (HTO), formerly named SJW Group, a ‘water stock‘ utility company.

This article will examine H2O America’s business, growth prospects, and valuation to determine if shares are worth purchasing now.

Business Overview

H2O America was founded in 1866 and was initially known as the San Jose Water Company. HTO rebranded from SJW Group in May of 2025. With a market cap of $1.7 billion, H2O America is one of the smallest Dividend Kings.

H2O America is a water utility company that purchases, stores, purifies, and distributes water to consumers and businesses.

Source: Investor Presentation

Following the completed merger with Connecticut Water Service (CTWS), HTO America currently consists of five subsidiaries:

San Jose Water
Connecticut Water
Maine Water
Texas Water
Land Company

San Jose Water Company, a regulated utility, has 232,000 connections and provides water to roughly one million well-educated and affluent customers in the Silicon Valley area. The purchase of CTWS added 138,000 connections and 450,000 customers in Connecticut and Maine.

Texas Water is a regulated water utility company that has 29,000 water and 1,000 wastewater service connections in the area between San Antonio and Austin, Texas. Water utilities supply almost all revenues for HTO America, but there is a real estate portion of the company as well.

The Land business owns and develops properties for both residential and warehouse customers in California and Tennessee. HTO uses the rental income from these properties to reinvest in its water utility business.

Growth Prospects

On April 28th, 2025, H2O America reported first-quarter results for the period ending March 31st, 2025. Revenue grew 18.2% to $176.6 million, beating the analysts’ estimates by $16.1 million.

Earnings-per-share grew 39%, from $0.36 to $0.50, beating the analysts’ consensus by $0.14.

As in recent quarters, the improvement in revenue resulted primarily from higher rates and an increase in water usage.

Higher rates overall added $17.2 million to results for the quarter, while higher customer usage added $1.0 million.

Source: Investor Presentation

Before the merger, California contributed 97% of H2O America’s income. In the most recent quarter, however, this figure was down to 61%. Connecticut is the second-largest source of income at 29%, with the remaining states of Texas and Maine making up the rest.

H2O America still relies on just two states for the vast majority of its income, but the company is slightly less top-heavy than before the merger. The combination of H2O and CTWS has made the combined company the third-largest investor-owned water utility company in terms of both enterprise value and rate base.

The combined entity has nearly 406,000 service connections and provides services to 1.5 million people.

H2O America has compounded its earnings per share at an average annual rate of 5% over the last decade, but it has grown its earnings per share by 6.6% per year on average over the last five years. The impressive performance in the previous five years has resulted primarily from the merger with CTWS in 2018.

CTWS was no slouch either when it came to earnings growth, as the company has compounded earnings-per-share by 6.7% annually in the decade leading up to the merger.

H2O America has been active on the acquisition front in recent years, but the company just announced that it had purchased Quadvest for $540 million, increasing H2O’s exposure to the Houston area. Quadvest has more than 47,000 active connections, over 89,000 connections under contract and pending development, 50 water treatment plants, 27 wastewater treatment plants, and 89 lift stations and underground assets. Management expects that Texas will become the second-largest utility operation by 2028.

We expect that H2O America will be able to generate earnings growth of 8.0% per year on average through 2030.

Competitive Advantages & Recession Performance

As a regulated utility, H2O America is restricted in how much it can raise rates for customers. Fortunately for the company, they operate in areas, i.e., Silicon Valley and Central Texas, which have seen high population growth rates.

As these populations grow, they need reliable access to water. To encourage H2O America to invest in improving the water infrastructure in these areas, local governments permit the company to increase rates to fairly high levels.

For example, San Jose Water received approval for a rate increase of 9.8%, 3.7%, and 5.2% for 2019, 2020, and 2021, respectively. The company settled some pending rate cases in several states in 2022, which directly benefited results in 2023. More recently, the company announced during the third quarter of 2024 that it had settled a rate case with California that will provide greater revenue recovery for the 2025 to 2027 period. Significant rate increases should flow right to the company’s bottom line.

Another advantage for H2O America was tax reform legislation that went into effect in 2018. Tax reform actually lowered H2O America’s tax rate from 37% in 2017 to 20% in 2018. The impact of tax reform will continue going forward.

Between a lower tax rate and the additional income from the merger with CTWS, H2O has an opportunity to offer robust dividend growth going forward.

H2O America has paid an uninterrupted dividend for the past 80+ years. The company has raised its dividend for the past 57 years. The average raise in the decade before the merger with CTWS was 4.8%.

In recent years, the company rewarded shareholders with a 7.1% increase in 2019, a 6.7% raise in 2020, a 6.3% increase in 2021, a 5.9% raise in 2022, a 5.6% increase in 2023, a 5.3% raise in 2024, and a 5% hike in 2025. Shares of HTO yield 3.3% at the moment.

Source: Investor Presentation

While future growth looks attractive, it is also essential to examine how a company performed during tough economic times. HTO’s earnings-per-share during the Great Recession are below:

2007 earnings-per-share: $1.04 (12.6% decline)
2008 earnings-per-share: $1.08 (4% increase)
2009 earnings-per-share: $0.81 (25% decline)
2010 earnings-per-share: $0.84 (4% increase)

HTO was not immune to the last recession as earnings-per-share declined 22% from 2007 through 2009. While earnings growth did return in the next year, it took the company until 2014 to top its pre-recession high.

Water remains a crucial resource for consumers even during a recession, but H2O America’s performance during and after the last financial crisis shows that growth can be elusive. That said, the company’s more diversified business model today makes it likely that the next recession won’t be as severe for HTO.

Valuation & Expected Returns

H2O America reaffirmed its guidance for 2025 on the last earnings call, with the company still expecting earnings-per-share in a range of $2.90 to $3.00 for the full fiscal year. Using the current share price of $51 and the midpoint of expected earnings per share for the year, the stock has a price-to-earnings ratio of 17.3.

This compares favorably to our target price-to-earnings ratio of 26, which is a slight discount to the stock’s five- and 10-year average multiple. If the stock trades at our target valuation level by 2030, it will enjoy a 8.5% annualized valuation tailwind in its returns.

Total returns are projected to be 19.2% annually through 20230, stemming from 8% earnings growth, a starting yield of 3.3%, and a high single-digit tailwind from multiple expansion.

Final Thoughts

H2O America has taken steps to diversify its business model, making the company less reliant on California for income. HTO remains top-heavy, with just two states accounting for 80% of revenue, but this is an improvement over the individual companies’ pre-merger performance with CTWS. Recent actions are likely to lead to the fast-growing areas of Texas becoming a major contributor to results in future years.

H2O America also has a very long history of dividend growth and is one of just 55 companies with at least five decades of dividend growth. This is an impressive accomplishment.

With an impressive track record of dividend growth and our projection for annual returns in excess of 19%, we rate H2O America as a buy.