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Taking Stock: Water company value is crystal clear

Malcolm Berko: The York Water Co. was formed almost two centuries ago.
BY Malcolm Berko Published: August 25, 2013

Dear Mr. Berko: I want to make a long-term investment in some water utility stocks. What do you think of The York Water Co., which has been doing business in my state for almost 200 years?

WH, Bethlehem, Pa.

Dear WH: In 1745, when Thomas Jefferson was a toddler playing in the cotton fields of Virginia and George Washington was an adventurous teenager, Mathias Aspden purchased a rundown brewery property in the village of Haddonfield, N.J., and commenced to build a tavern along the village's main road. That road was called Kings Highway, and the tavern was called Indian King Tavern.

In the 1750s, the colonies were a narrow ribbon of coastal settlements about 100 miles wide, and Philadelphia was the largest and wealthiest city in the Delaware Valley. In 1816, Secretary of State James Monroe was elected president, succeeding the two-term presidency of Democratic-Republican James Madison. And also in 1816, a group of local businessmen gathered at Indian King Tavern, where they officially formed The York Water Co. and issued stock certificates.

That year, the board of directors contracted for 1,300 logs that were 12 feet long with an average width of 18 inches. Holes 3 to 4 inches in diameter were bored into the logs, and the logs were used as pipes. They were floated down the Susquehanna River and then transported by wagon from Wrightsville, Pa., where there was a spring, in an area called Baumgartner's Wood, which is now the site of Penn State's York campus. Water was piped into the town square, and by the end of 1816, 35 homes had water on the premises. In 2006, 190 years later, York Water was invited to ring the bell at the Nasdaq MarketSite in Times Square.

In 1817, York Water (YORW-$19.78) paid its first annual dividend, and the dividends continued for 53 consecutive years. Then, in 1870, YORW began to pay dividends quarterly, and that continued for 143 years, or 571 quarters. Today this water utility has 105 employees and $43 million in revenues, aided by a growing population and occasional smaller acquisitions over the years.

In its most recent fiscal year, ending in March, YORW had net profit margins of 22.7 percent and earned $9.5 million, or 74 cents a share, after paying its CEO a salary of $280,000. And the 55-cent dividend, which has been increased in each of the past 14 years, yields 2.6 percent.

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