H2O America expands in Texas with acquisitions but faces dilution and dividend growth risks

H2O America, a regulated water utility, is expanding its operations in Texas by acquiring two utilities in the Houston area. This move aims to diversify its revenue base and increase scale but has led to a significant equity issuance, raising the share count by over 11 million shares. The increased share count pressures earnings per share growth and raises concerns about the sustainability of its dividend growth. Despite these challenges, H2O America retains its Dividend King status with a 58-year streak, though dividend growth is slowing and the payout ratio is expected to stay between 60-70%. The stock currently trades near fair value, leading to a 'hold' rating due to balanced strategic benefits and dilution risks.