What American States Water (AWR)'s Approved Deferral of Cost of Capital Means for Shareholders

• On November 18, 2025, the California Public Utilities Commission approved American States Water Company’s request to defer the cost of capital application for its subsidiary, Golden State Water Company, by one year, keeping in place the current Water Cost of Capital Mechanism and a 7.93% authorized rate of return through December 31, 2027.
• This extension ensures regulatory stability for the company, allowing for more predictable financial planning at a time when investor concerns about rate volatility and returns remain heightened.
• We'll examine how the deferral of the cost of capital application and maintained returns shapes American States Water's investment outlook.

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American States Water Investment Narrative Recap

To be a shareholder in American States Water, you need to believe in the long-term value of regulated water utilities and the company's ability to navigate California’s challenging regulatory and environmental factors. The recent CPUC decision to defer Golden State Water’s cost of capital application preserves a predictable 7.93% return through 2027, but it does not materially change the biggest short-term catalyst, steady rate base growth, or lessen the ongoing risk of regulatory-driven earnings volatility tied to water consumption.

Among recent announcements, the July 2025 dividend hike to $0.5040 per share stands out. This move, affirming 71 consecutive years of growth, reinforces management’s confidence in recurring earnings and helps offset concerns about earnings stability, especially at a time when regulatory mechanisms remain in flux and cost pressures persist.

However, investors should also be mindful that while regulatory certainty has increased for now, higher water supply costs and wildfire-related expenses still challenge margins if cost recovery in rates slows...

Read the full narrative on American States Water (it's free!)

American States Water's outlook anticipates $749.2 million in revenue and $155.0 million in earnings by 2028. This scenario assumes a 6.7% annual revenue growth rate and a rise in earnings of $30.7 million from the current $124.3 million level.

Uncover how American States Water's forecasts yield a $81.50 fair value, a 11% upside to its current price.

Exploring Other Perspectives

Three Simply Wall St Community members have set fair values for American States Water ranging from US$59.44 to US$199.94. With regulatory risk now in sharper focus, your views on earnings volatility may shift how you see the company's quality and stability.

Explore 3 other fair value estimates on American States Water - why the stock might be worth over 2x more than the current price!

Build Your Own American States Water Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your American States Water research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.
• Our free American States Water research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate American States Water's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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