Market Trends and Stock Insights
Earlier this month, major stock indices like the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite hit new all-time highs. However, with stock valuations almost at their peak, finding fundamentally sound investments is becoming increasingly challenging. This situation certainly complicates the investing landscape.
This year, I’ve bought some stocks from my existing portfolio, but only one new addition: York Water. This company seems to be positioned quite well, especially given the current expensive market scenario.
Challenges Ahead for Wall Street
The concept of “value” can be quite subjective and often varies among different investors. Yet, one metric stands out—the Shiller price-to-earnings ratio (P/E) for the S&P 500, which provides a clearer picture. Known as the economy-adjusted P/E ratio (CAPE ratio), it takes into account the average inflation-adjusted earnings over the past decade.
Historically, the Shiller P/E ratio has averaged around 17.4 since January 1871. As of early June, it reached a staggering 42.84, nearing the all-time high of 44.19 observed just before the dot-com bubble burst in December 1999.
The Shiller P/E is perilously close—just 3.5% away—from surpassing the infamous dot-com bubble valuation, which stands as the highest ever recorded.
Data suggests that a Shiller P/E ratio above 30 isn’t sustainable in the long run. While it may be tough to predict exactly when a downturn will happen, this ratio has historically indicated significant declines. In fact, every time the CAPE ratio exceeded 30, major indices dropped by more than 20%.
This suggests a major correction or bear market could loom ahead.
York Water: A Standout Investment
Despite the noise in the market, I’ve found my interest piqued by York Water, a company in the water and wastewater sector. Interestingly, they don’t have many deals lined up for 2026, but their model has some clear advantages. Demand for their services tends to remain stable year over year, and they operate mostly as monopolistic entities in the areas they serve. This alleviates concerns about losing cash flow to competitors.
Operating as a regulated utility in south-central Pennsylvania, York Water does face some restrictions. They need approval from the Pennsylvania Public Utilities Commission (PPUC) to increase rates, but this regulation protects them from unpredictable wholesale prices, thereby ensuring a more stable cash flow.
In February, the PPUC sanctioned a rate increase to support a significant $145 million infrastructure investment. This is expected to boost annual revenue by nearly $18.85 million—a hefty 24% increase from the previous year.
One of the most remarkable aspects of York Water is its market-leading dividend policy. Known as “Wall Street’s biggest dividend stock,” it has a continuous dividend payment streak that dates back to 1816. This achievement surpasses the history of nearly all publicly traded companies in the U.S. by a notable margin.
Essentially, York Water stock is quite reasonably priced right now. While its average forward P/E over the past five years has been around 29.3, it currently trades at just 17.1 times the earnings projected for 2027. If the market does take a downturn, it’s likely that York Water will be in a strong position to grow.
