Dividend Kings in Focus: Middlesex Water Company

Updated on July 11th, 2025 by Felix Martinez

The Dividend Kings are an illustrious group of companies. These companies stand apart from the vast majority of the market as they have raised dividends for at least 50 consecutive years.

We believe that investors should view the Dividend Kings as the highest-quality dividend growth stocks to buy for the long term.

With this in mind, we created a full list of all the Dividend Kings.

You can download the full list, along with important financial metrics such as dividend yields and price-to-earnings ratios, by clicking the link below:

This group is so exclusive that there are just 52 companies that qualify as a Dividend King. One of the constituents of the Dividend Kings list is Middlesex Water Company (MSEX), a water utility company that has been in business for over 125 years.

This article will discuss the company’s business overview, growth prospects, competitive advantages, and expected returns.

Business Overview

Middlesex Water Company was formed in 1897, making the company one of the oldest water and wastewater utility names in the U.S. The company has operations primarily in New Jersey and has an annual revenue of approximately $192 million.

Like many of its peers, Middlesex is primarily focused on the regulated portion of its business.

Source: Investor Presentation

Middlesex provides basic water-related services to customers, such as selling, distributing, collecting, and treating water. The non-regulated business includes service contracts that include the operation and maintenance of municipal private water and wastewater systems in New Jersey and Delaware.

The vast majority of revenue comes from the regulated side. One of its most significant service areas includes Middlesex County, where the company provides water services to over 61,000 retail customers. This business contributed ~60% of revenue last year.

Middlesex Water Company reported Q1 2025 net income of $9.5 million, or $0.53 per diluted share, compared to $10.7 million, or $0.59 per share, in Q1 2024, a decrease driven by a one-time $4.3 million (net of tax) recovery in 2024 for costs related to the Park Avenue water treatment plant, partially offset by rate increases, customer growth, and higher wholesale consumption in 2025. Operating revenues rose 9.4% to $44.3 million from $40.5 million, with $3.4 million from the Middlesex system and $0.6 million from Tidewater Utilities, driven by rate hikes and increased usage, though tempered by $0.2 million lower non-regulated contract services revenue. The company did not provide specific full-year 2025 guidance but emphasized sustainable growth and infrastructure investment.

Operating expenses increased by $2.0 million to $32.7 million, primarily due to higher variable production costs, weather-related main break activity, and a $1.1 million increase in depreciation from new infrastructure. The company invested $19 million in water and wastewater infrastructure upgrades in Q1 2025, with plans for $93 million throughout the year. Middlesex completed the $4.6 million acquisition of Ocean View’s water utility assets in Delaware, serving 900 customers, and filed a third DSIC rate application in New Jersey, expected to generate $1.9 million in annual revenues starting June 2025, adding to $1.1 million from prior DSIC filings.

The company declared a Q2 2025 cash dividend of $0.34 per share, payable June 2, 2025, continuing its 52-year streak of annual dividend increases. Middlesex’s financial position remained strong, though specific liquidity details were not disclosed. The acquisition of Ocean View and ongoing infrastructure investments reflect Middlesex’s focus on selective growth and system resiliency. With a robust operational strategy and regulatory progress, including DSIC filings, the company is well-positioned to enhance service reliability and deliver long-term shareholder value.

Growth Prospects

Utility companies are typically classified as slow, but steady growers. This doesn’t necessarily apply to Middlesex, however, as the company had an earnings-per-share compound annual growth rate of 7.7% for the 2014 to 2024 time period. This is a strong growth rate for a business that is mostly regulated. It should be noted that growth for the company hasn’t always been in a straight line over the long term.

Since the majority of revenue comes from regulated business, Middlesex is at the mercy of the approval of rate increases to grow.

Fortunately, the company heavily invests in its infrastructure in order to justify customer rate increases. For example, the New Jersey Board of Public Utilities approved a 40% increase in Middlesex’s rates in one of the company’s most significant service areas for 2022. This wasn’t just a one-time raise, as the approval board has always approved the company’s request to raise rates.

Rate increases will likely continue to be a major factor for the company as Middlesex continues to make significant investments in its aging water infrastructure. This will not only improve the quality of operations but also lead to rate hikes being approved.

Notably, Middlesex has enjoyed an approximate average annual growth of 12.8% in its rates over the last six years.

Source: Investor Presentation

Therefore, it is only natural to expect rate hikes to comprise a significant growth driver for the utility in the upcoming years.

In addition to rate increases, Middlesex can grow by adding new customers while also keeping current customers.

For example, last year, Middlesex completed a new agreement to continue to manage water and sewer utility operations with the Borough of Avalon, New Jersey. The new 10-year agreement takes the place of the prior contract. The new contract provides for the maintenance of operations and customer services.

The non-regulated business could be a significant source of growth as well. In 2013, Middlesex was awarded a $32 million contract to construct and maintain the water distribution network for the Dover Air Force Base in Delaware. This contract will provide decades of recurring revenue, as the contract is for 50 years.

We expect MSEX to grow its earnings-per-share by approximately 4.6% per year on average over the next five years.

Competitive Advantages & Recession Performance

Utility companies often benefit from multiple advantages. The first is that they usually operate in a near-monopoly in the areas that they serve.

In the case of water utilities, Middlesex and its peers provide the most basic staple of all, water. Customers are going to need the services that the company offers, regardless of the strength of the economy.

Middlesex also benefits from its diversified business.

Source: Investor Presentation

Middlesex receives slightly more than 50% of its revenue from residential customers. Still, there are other categories, such as commercial, contract sales, and fire protection, that contribute meaningfully to the company’s business.

Given these built-in advantages, many utilities often outperform other sectors of the market during recessions. Below are Middlesex’s earnings-per-share results before, during, and after the Great Recession:

2006 earnings-per-share: $0.82
2007 earnings-per-share: $0.87 (6.1% increase)
2008 earnings-per-share: $0.89 (2.3% increase)
2009 earnings-per-share: $0.72 (19.1% decrease)
2010 earnings-per-share: $0.96 (33.3% increase)

Middlesex’s earnings-per-share initially grew during the recessionary period before falling by a high double-digit amount in 2009, showing that the utility wasn’t completely immune to the economic backdrop of the period. One positive was that revenue stayed relatively flat for the 2008 to 2009 period.

Significantly, the company rebounded in a substantial way the very next year and set a new high for earnings-per-share. Growth has primarily been in an uptrend since.

Valuation & Expected Total Returns

Middlesex gained entrance into the Dividend Kings following the company’s dividend increase announcement on October 21st, 2022. The company recently raised its dividend by 4.6% and has now raised its dividend for 52 consecutive years. Middlesex currently yields 2.4%. The company has paid a continuous dividend since 1912.

As previously mentioned, we expect 4.6% EPS growth per year on average over the next five years.

Finally, the last component of total returns will be valuation. Shares are currently trading at 19 times our earnings-per-share projection for the year.

Given the company’s tailwinds and business model, we believe the fair value is 20 times earnings, which is in line with the average valuation of the stock over the last decade. Reverting to our target valuation by 2030 would result in an annual return expansion of 1.5%.

Therefore, Middlesex is forecasted to return 8.5% per year on average through 2020.

Final Thoughts

There is much to like about Middlesex, namely its monopoly status, the high success of rate increase approvals, and the long history of dividend growth. Only the most well-run businesses can pay dividends for as long as Middlesex has.

That said, the stock is trading at a fair value to its average historical valuation since 2014. Despite the attractiveness of the company and its dividend growth streak, we believe investors are better off elsewhere, as forecasted returns over the medium term are very weak. Thus, we recommend a “Hold” at the current price.