Dividend kings, those rarest of companies with 50+ years of consecutive dividend growth, can be a great place to start looking for relatively safe income investments.

That’s because most companies that not only survive for 50 years but thrive enough to reward investors with rising dividends often have solid fundamental characteristics, including an advantaged business model, a conservative management team, and a shareholder-friendly corporate culture.

Let’s take a look at SJW Corp (SJW), which is one of America’s newest dividend kings with 50 consecutive years of payout growth.

Unlike most companies in this group of large and popular blue chip stocks, this fast-growing water utility has a market cap below $2 billion and is not as well known.

Business Overview

Founded in 1866 as the San Jose Water Company, SJW has today become a regulated water utility that serves customers in two rapidly expanding markets: Silicon Valley, California, and San Antonio, Texas.

Source: Investor Presentation

Note the Texas Water Alliance was sold for $31 million in February of 2016.

The company’s two primary business units are San Jose Water and SJWTX, which owns the Canyon Lake Water Service Company.

San Jose Water’s 111 wells, 2,400 miles of water mains, and two water treatment plants service 229,000 connections and provide water to approximately 1 million people (about 33% of the population) in 138 square miles of Silicon Valley, with a total capacity of 283 million gallons of water per day.

Meanwhile, Canyon Lake Water’s 42 wells, 599 miles of water mains, and three treatment facilities provide up to 9 million gallons a day to 13,000 connections (serving 39,000 people) across 240 square miles of central Texas, located just north of San Antonio.

The company also has a real estate arm, which owns undeveloped commercial acreages as well as residential and warehouse properties in California and Tennessee, which it uses to help fund its core water utility business.

In 2016, 98% of SJW’s revenue came from its regulated water businesses, with $6.7 million generated by its land business subsidiary.

Business Analysis

SJW Group enjoys a wide moat as a regulated water utility, courtesy of its government-sanctioned monopoly, which grants it stable and predictable profitability and returns on shareholder capital.

For example, in 2016 the California Public Utilities Commission granted San Jose Water a 9.43% return on equity as part of an 8.6% increase in water rates for 2016, with inflation-indexed rate increases in 2017 and 2018.

This encourages SJW to continue investing in large infrastructure projects to provide dependable water service in its growing territories, which have minimal to no competition due to the nature of the industry.

Unlike most water utilities, which enjoy stable but slow growth over time, SJW, thanks to the rapid growth rates of its water markets, has enjoyed some of the industry’s fastest revenue and earnings growth rates.

Source: Simply Safe Dividends

While SJW lacks the economies of scale that its larger peers such as American Water Works (AWK) and Aqua America (WTR) enjoy, management has been able to make good progress at improving its overall profitability to the point where it is now nearly matching or even exceeding the industry average margins and returns on capital.

Trailing 12-Month Profitability

Sources: Morningstar, Gurufocus

Of course, one of the reasons why investors are attracted to water utilities in the first place is that this is an inherently defensive (i.e. recession resistant) business, one that will require massive amounts of infrastructure investment in the coming decades.