Another Small Water Utility: Pennichuck Corp. (PNNW)

Pennichuck collects and distributes water in southern and central New Hampshire. PNNW also engages in several unregulated businesses, including water monitoring services and real estate ventures. New Hampshire is an attractive state and a good investment destination. It offers low taxes, a vibrant economy, and a good balance between development and preservation of rural and wilderness areas. There is plenty of good water in New Hampshire.

This company has been around a long time, in fact they claim to be New Hampshire’s oldest continuously operating business, but Pennichuck is still very small with a market capitalization of only 83M. The stock has a long-term performance profile similar to the S&P 500, but it is much less volatile (beta 0.03) and offers a much more generous dividend yield (3.35%). The company has an excellent recent dividend history and there were 4-for-3 stock splits in 2001 and 2005.

The shares achieved an all-time high of 25.25 last February, then declined until they found a bottom at 16.85 in September. They have rallied from there to a recent price of 19.79.

There are a several issues that make me wary of this stock. One is that the city of Nashua, N.H. is interested in a possible hostile takeover of PNNW. Secondly, the company is involved in expensive litigation with the city of Nashua regarding eminent domain issues. And finally, it must be noted that earnings have been erratic in recent years, and there have been several extended periods of declining earnings.

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