SJW Group (SJW) is a water utility company that has operations in Silicon Valley area of California and the area north of San Antonio, Texas. The company purchases, produces, stores, purifies and transports water to customers in these areas. SJW Group has a small real estate portion of the company that owns and develops residential and warehouse properties in California and Tennessee.
SJW Group is a member of the Russell 2000 index, the best known benchmark of domestic small cap stocks. According to Vanguard, small caps have out gained the S&P 500 over the past decade. While there are some risks associated with smaller companies due to their size, they also have the potential for higher growth.
This article will look at SJW Group’s recent acquisition news, 2nd quarter earnings results and dividend growth history to determine if this is a small cap company investors should consider owning.
Acquisition News
On March 14th, SJW Group announced that it would be merging with Connecticut Water Service (CTWS) in an all stock merger. CTWS is a water utility company that provides services to 135,000 customers in Connecticut and Maine. On August 6, SJW Group announced that it would be purchasing CTWS for $70 in cash instead of a stock for stock merger. This acquisition will make the new SJW Group the country’s third largest water utility company.
This acquisition is expected to be completed in 2019 and be immediately accretive to earnings for SJW Group. Post completion, 60% of earnings will come from California, 30% will come from Connecticut and the remaining 10% will come from a combination of Texas, Maine and Tennessee.
Investors should be aware that another water utility company, California Water (CWT), offered to buy SJW Group for $70 per share in cash. That offer was rejected by SJW Group.
2nd Quarter Earnings Release
SJW Group released 2nd quarter earnings results on July 25th. The company earned $0.72 per share during the quarter. This result was in-line with what analysts had expected, but declined 20% from the 2nd quarter of 2017. Revenue was down nearly 3% year over year to $99.1 million. Analysts had been expected $104 million in sales for the quarter.
