Today’s gain has a dual boost for the water utility giant. It is a 12% actual hike in the dividend on the surface. What matters more than that just the percentage hike is that the dividend yield is rising from 2.40% to 2.69%. American Water’s dividend practice is said to link common stock dividend increases to earnings per share growth. The water utility giant also is said to be targeting a payout ratio between 50% and 60% of net income.

The company is representing that its annualized earnings have increased by 14% from 2010 to 2012 on a compounded basis. Thomson Reuters calculates earnings estimates on a pro forma basis, and the earnings growth for 2013 is projected to be 3.75% and then 7.2% for 2014.

On a normalized earnings basis, the dividend hike today would represent almost 51% of an income payout ratio for 2013. American Water Works trades at a market premium at almost 19 times 2013 earnings and about 17.5 times expected 2014 earnings. We continue to believe that increasingly higher highs will be seen in water stocks. Today’s dividend hike is just one of the reasons.

The increased dividend will be payable on June 3, 2013, to all shareholders of record as of May 24, 2013. Shares are currently down by 0.5%, at $41.65 against a 52-week trading range of $32.75 to $42.53.

24/7 Wall St. wanted to come up with a list of companies that might fall victim to a portion of the public observing Lent by giving up something precious for more than 40 days all contained in the same quarter. We certainly are not trying to say that these products are all bad, because many are too well anchored in our culture to be eliminated for very long. Many of them are even too fun or too precious to give up.

It has been nearly two years since we gave our own list of the 10 things that Americans waste the most money on. You may guess many of them: certain apparel items, tobacco, entertainment, alcohol, TV and media, gifts, food outside of the home and more. We also want to stress that if you live your life to avoid all of those things, chances are high that you are considered the most boring person alive by your friends and neighbors.

All things being equal, many in America and the rest of the world actually do give up something during Lent. Some sacrifices are physical things that cost money. Other sacrifices are simple (or difficult) personal efforts that have nothing to do with wasting money or being bad for your health. We have picked the largest companies that we feel have large direct exposure to changes of public behavior, particularly that fit into the sin or waste category.

Not all of these companies would fit directly within the category of being “sin stocks.” We are not trying to identify companies as being sinful. We are showing many companies that could be adversely impacted if Joe Public takes Lent very seriously this year. As a reminder, we already had one quarter of negative gross domestic product growth, and consumer spending is up to 70% of that figure.

This year has seen a great start for stocks, and many of the go-to water stocks are at or challenging new 52-week (or all-time) highs. Our focus is on the actual water owners rather than just the water technology and equipment makers for water companies and water utilities. It is amazing that just about this entire group is either right at 52-week or all-time highs or are close.

American Water Works Company Inc. (NYSE: AWK) is the king of all water stocks as the largest public water utility owner in America. It is now worth almost $7 billion, and with shares are $39.15 it is back within striking distance of a new all-time high as the 52-week range is $32.75 to $39.38. This also pays a 2.6% dividend yield to its common holders.

American States Water Co. (NYSE: AWR) is now within literally a few million dollars of being worth $1 billion. This company is geographically centric to California as it serves 75 communities in 10 counties in California. Shares crossed above the prior 52-week highs on Friday and again on Monday, with a new high of $52.08 against a prior 52-week range of $34.90 to $52.03. The dividend yield here is about 2.7%.

Aqua America Inc. (NYSE: WTR) is another regulated water utility, and its shares matched the prior 52-week high put in on Friday, and the new 52-week range is $21.52 to $28.70. This one is worth $4 billion and serves customers in customers in Pennsylvania, Texas, North Carolina, Ohio, Illinois, New Jersey, New York, Florida, Indiana, Virginia, Maine and Georgia. The dividend yield is now 2.4% since its shares have risen.

California Water Service Group (NYSE: CWT) is within about 2% of the 52-week high of $19.87, but still 10% from the prior highs of about $22 from 2006 to 2008. The company serves approximately 2 million people in California, Washington, New Mexico and Hawaii communities. This one is small at an $820 million market capitalization, and it has a dividend yield of about 3.3%.

One exception to the 52-week high challenge is Connecticut Water Service Inc. (NASDAQ: CTWS). Many will have never heard of it as it serves only about 55 communities in Connecticut (90,000 customers, which is about 300,000 people). Trading at $29.54, its 52-week range is $26.69 to $32.31. It also has a smaller market value of only $260 million, but it yields above-average at 3.3% for its common holders.

Consolidated Water Co. Ltd. (NASDAQ: CWCO) is even smaller and it is based in Cayman. Shares still hit a 52-week high of $9.34 on Monday, against its prior 52-week range of $6.70 to $9.30. The market cap here is a mere $135 million, and it also yields some 3.3%.

Middlesex Water Co. (NASDAQ: MSEX) is worth only about $307 million. With shares at $19.85, it is within 1% of going above the 52-week range of $17.48 to $20.06. Volume is very small here but it offers a 3.8% dividend yield. It provides service to approximately 150,000 customers, with a population of approximately 303,000 in central New Jersey through its contract sales. Its main operations are New Jersey, Delaware and Pennsylvania.

The York Water Co. (NASDAQ: YORW) just matched its 52-week of $19.05 on Monday against a 52-week low of $16.75. With a market cap of only $245 million, the dividend yield is about 2.9%. York Water specifically serves about 43 municipalities located in the York and Adams County area in Pennsylvania.

PowerShares Water Resources (NYSEMKT: PHO) is a water exchange traded fund, but we would note that it and other water ETF products tend to be more focused around the water technology and equipment makers. That being said, this ETF hit a high of $22.29 on Monday, against a prior 52-week range of $16.90 to $22.33.

What draws investors to water is the same thing that has drawn them for years and years: water is THE ultimate commodity. Americans in general have no clue how this precious commodity is abundant at home but scarce or in controlled supplies elsewhere. The drought conditions may have improved the understanding of how water scarcity works, but many would argue that America is still oblivious to this trend.

Investing in water is appropriate for just about all types of investors. All of the utilities pay a decent dividend or a high dividend, and all have proven to offer some defensive characteristics and growth characteristics for investors through time.

If government spending is about to get chopped, and if the public is about to suddenly face higher taxes in general, it is no secret that investors would have to be cautious. After the run we have seen in stocks, it leaves very few safe places for Joe Public to invest in at a time when Treasury notes and bonds offer investment yields so low as to be insulting. 24/7 Wall St. has identified several key companies in defensive investment sectors that likely would maintain investor interest during such a risky period.

Companies with heavy government contracts are instantly out. Companies that are highly dependent on an optimistic consumer or that offer goods that the public can easily cut back on were also eliminated. Another issue, one which eliminated many great companies, is that Wall St. analysts had to have a consensus price target from Thomson Reuters that was higher than a share price today. Preference was given also to those companies that offer a dividend, as dividends create a return on capital for investors when uncertainty may be much higher than normal.

The company’s board of directors has approved a $0.075 per share increase in its quarterly cash dividend to $0.355 per share for the common stock of the company, a gain of 27%. It is also the company’s 305th consecutive dividend payment and the 58th consecutive year in which American States Water Co. shareholders have received an increase in their annual dividend payments.

This might not sound like much since the volume is about 100,000 shares per day and with a market cap of $766 million. The new dividend yield is actually 3.5% now for new investors, and we would argue that with the recent sector price gains that this is an above-peer payout.

Industry leader American Water Works Company Inc. (NYSE: AWK) now only pays about 2.7% to new investors buying at the current prices, and it already recently saw a dividend hike. California Water Service Group (NYSE: CWT) currently has a yield of about 3.4%, but that is also a $774 million market cap.

JON C. OGG

Dow Jones noted earlier that the beer giant (or its brokers) has received a whopping $26 billion worth of bond orders ahead of its offering.  Here is why we say that “Bud” can finance this deal for close to free: the company has not even formalized how large the bond issue will be.  We expect an issue of $3 billion to $5 billion but now the company could (and maybe even should) decide to leverage up. The use of proceeds is effectively to fund the deal: “The Issuer intends to apply substantially all of the net proceeds from the sale of the Notes to general corporate purposes and pre-funding of financing related to the announced combination with Grupo Modelo.”

Standard & Poor’s Ratings Services rates the beer giant as investment grade with an “A” rating after a recent upgrade from “A-” earlier this year. Fitch Ratings recently affirmed the beer giant’s Long-term Issuer Default Rating and senior unsecured rating at ‘A’ earlier this month after the Grupo Modelo acquisition was announced. Moody’s is also at an “A” rating.

The financing will of course not be free, but it could go off at a price premium or a lower spread than other “A” rated deals.  S&P just showed this week that the bond spreads for ‘AA’ credit tightened by 3 basis points 151 basis points and that the ‘A’ spread tightened 2 basis points to 194 basis points.  While that spread is not universal among all maturities, the 5-Year Treasury yield is only 0.62% and the 10-Year Treasury yield is only 1.5%.  What if Anheuser-Busch decided to go further out on the curve?  The 30-Year Treasury’s “Long Bond” now yields only 2.60%.

If the deal is really this much oversubscribed without even having been shown in detail, it is easy to assume that this “A” rating may actually price like a “AA” rating or at least with a narrower spread than many other “A” rated companies would pay.  It looks like the cost of financing might be as little as 2% to 3% per year.  If that is not close to free financing to lock up an acquisition of this caliber then what is?

JON C. OGG

It was late in 2011 when Coca-Cola went after a $2 billion investment in India.  Now it is going to be $3 billion more through 2020.  For people living in India, this may be a very pertinent question.  The big consideration is that Pepsi’s Chairman and CEO Indra Nooyi is, after all, an Indian-born American. The reason that this market matters so much is that it is second-largest in the nation behind China for population. The United States is just over 310 million as its resident population as of today; India is listed in the CIA World Factbook as having nearly 1.2 billion.

Both Coke and Pepsi have had a presence in India for years. The issue is that this is a huge growth market that offers exponential gains for both Coke and for Pepsi through time if you consider the decade or two beyond 2020.  It is a beverage market share war which is far from over but Coca-Cola has now decided to go after it in a much harder and faster way.

The market does not care as far as the tape is concerned on Tuesday as this is not the sort of news that drives trading on a one-day basis.  This is a matter which should be good for long-term investors.

JON C. OGG

Anheuser-Busch InBev simply noted that it routinely considers a variety of strategic options to create value for its shareholders and that there have been discussions between the company and Grupo Modelo over a possible transaction to expand its current relationship. AB, or Bud, further said that these discussions may or may not lead to a transaction and any speculation on terms and conditions is premature as there has been a long history of partnership between these two players.

In short, “We are talking but we won’t tell you anything further.”  If this was really great news we would expect more of a reaction to the upside even if the small gain was on a down day for the market.  The rumor of the size was $10 billion to $12 billion, and Bud’s market cap is over $112 billion according to Yahoo! Finance.  Grupo Modelo brands include Corona, Modelo, Negra Modelo, Tropical, Pacifico and others.  It also has water brands as well under Gerber, Nestle, Perrier, Pellegrino and others.

It is sad when a $10 billion or $12 billion deal does not even scratch the surface. Anheuser-Busch InBev shares are up almost 1% at $70.97 and the 52-week range is $49.05 to $75.08.

JON C. OGG

The provider of water dispensers and bulk bottled water announced that it has received a commitment from a senior lender to enter into a new long-term $20 million senior revolving credit facility.  Primo also noted that it expects to close a term loan for up to an additional $15 million with a separate lender.  Investors will want to know that the second loan mentioned is secured by certain fixed assets of the company.

The credit facilities are expected to have a four-year term and will include customary terms and covenants and should close within 30 days, according to Primo. As far as the “use of proceeds” the company plans to pay off its existing senior credit facility and will use any remaining funds for general working capital purposes.

Thomson Reuters has only two estimates, but it is expected to lose money this quarter and the company is expected to make only $0.04 EPS in all of 2012.

The liquidity boost here is not without risk, but the stock of Primo Water is up 35% at $2.16 on 4-times normal trading volume after only about an hour of trading so far this Friday.  Even after the pop, the market cap here is only about $52 million.  We would note that this company carries almost no cash on its balance sheet.

To show just how bad this has been, the 52-week trading range is $1.50 to $16.00.  Investors often cheer any liquidity coming into a troubled company, even if there are risks associated with the infusion.

JON C. OGG

This is the largest of the public utilities in America and it has only been public (again) since 2008.  If you look just at the charts the initial thought may be that the stock got away from you.  We have been calling for a bright future here on this one since the low-$20′s, but we would still not shy away.  Investors should use any weakness as the opportunity, but the problem to consider is that this stock almost never pulls back by 10% from its new highs.  When it does, it has proven time after time to be a bargain.

American Water Works serves approximately 15 million people with drinking water, wastewater, and other water services in about 30 states and 2 Canadian provinces.  The market value is still not off the charts compared to electric utilities as it is valued at $5.85 billion.

Where it sounds expensive is its 17-times expected earnings multiple.  The reason for this is simple: it is a series of built-in local monopolies around America.  Power companies and telecom companies often have competing interests for their services even at the expense of some of the large operators.  That is just not the case in the world of water.

At $33.35, the 52-week trading range is $25.39 to $34.67 and the Thomson Reuters consensus is now up to $36.07.  Long-term we see this one going to $40.00 and the dividend yield is currently about 2.8% and it is a member of our Model 2012 Dividend Portfolio.  We expect another dividend hike to be announced this summer.

JON C. OGG