NEW YORK ( TheStreet) -- For Aqua America ( WTR), the name of the game is consolidation.

There are 55,000 different water systems in America, making it an extremely fragmented industry. At the same time, the Environmental Protection Agency is tightening its standards for clean drinking water. This creates opportunity as many of these water companies are owned by municipalities that may have a tough time affording the upgrades necessary to meet the new requirements.

That's where Aqua America comes in. It's been snapping up these companies, and while it suffers a temporary setback with each acquisition as it brings them into compliance, the situation usually ends of being profitable.

The water utility company recently purchased 51 water systems in Texas and sold 60 systems in Missouri as it continues to place its focus on growing states and areas with high populations.

The stock is up 23% for the year but analysts are slightly bearish on the company with seven of the 12 analysts covering the shares at either hold (6) or underperform (1).

Some customers are unhappy with rate increases Aqua America has sought but Chief Executive Officer Nick DeBenedictis says the boosts are necessary because the company has to spend millions cleaning up old neglected facilities. TheStreet recently caught up with DeBenedictis at the New York Stock Exchange.

TheStreet: This is a 125-year-old company and you've been on the stock exchange for 40 years, right?

DeBenedictis: Right. There are three celebrations going on here today. It's 125 years since Swarthmore college professors founded the company in Swarthmore, Pa.; 40 years since we've been on the New York Stock Exchange; and I start my 20th year at the helm this year.

I was looking at the numbers and the numbers are quite good. EPS and revenue are growing, the dividend is very healthy, but the stock doesn't seem to be responding. Is that frustrating for you?

DeBenedictis: Well, if you look at it month to month, or day to day, yes. But since I got here, the stock's up 900%. The dividend is up 20 years in a row. So I mean, it's the old tortoise and hare situtation. We're getting to the finish line.

You do have a good point. But when you look back before the financial crisis, though, it was higher and it's really struggled to come back since then.

DeBenedictis: Right. Well, earnings were flat in seven 2007 and eight 2008 . Nine 2009 , they started to take off. Ten 2010 , we're up 18% and in the first quarter of eleven 2011 , we're up 40%, so earnings are really coming back strong.

What is your outlook for the rest of the year?

DeBenedictis: Well, we expect to have another good year in 2011. This will be our 12th straight year of record earnings. We're looking to raise the dividend again this year. That is the board's strategy. We usually try to increase the dividend by 7% each year.

I can't do much more than that, put numbers up on the board. It's a solid business. We're one percent of the market share so we have a lot of room to grow, only a few big companies in the field. All the rest are municipalities, which have no entrepreneurial reason to expand or to consolidate and also now don't have the money with the financial crisis.

Since they are strapped do you think you will end up picking up some of those businesses?

DeBenedictis: Well, we would hope. The 15% of the market which is private, that probably is our domain. There is probably nobody else who wants that piece. 30,000 of them and a lot of small ones. We do about 25 acquisitions a year. We've done 250 in the last ten years and that adds about 2 to 3 percent normal growth, another percent from just normal people growing, the population growing in states like Texas, North Carolina, and so on, Virginia. And then the rest comes from pricing.

By investing in the system, the regulators allow us to earn on that investment. And with the stock trading at two and a half times book value , you've got the natural leverage of the leverage.

You've gotten involved in the natural gas drilling with the fracking in Pennsylvania. Do you feel there's any conflict of interest there because there's a lot of pollution involved with that water, but yet you are also providing clean water?

DeBenedictis: Well, it is such a small piece of our business although it's expanding. Believe me, we're not going to do anything to hurt core business which is drinking water. We've tested and tested. We've had laws in Pennsylvania now which are probably the strictest in the country, although the environmentalists are not going to admit that yet because they are trying to stop the drilling.

But triple casing, no drilling within a certain feet, I think it's 300 feet, of a well, no more taking the frack fluids of the site and putting them into water treatment plants. So I am very pleased that it can be done right in Pennsylvania.

Let's talk about Florida. There's been some complaints in Florida, specifically the Palm Beach area. What is your comment on that?

DeBenedictis: Well, first of all its 3% of our revenue. So I don't want to overstate Florida's importance to whole portfolio. We're in 13 states. Florida -- we bought troubled companies from the old Florida Water Co., which was part of an electric company. They dismantled their operation there. We had to fix everything because they hadn't kept it up.

When you fix things, you have to raise prices. We raised the prices and a lot of the people are seniors complaining and so on. I think we've stabilized now. We are making a profit in Florida. We just got awarded a rate case and we're in there for the long term.

So I think we're making people understand that we're going to give them good service and good water, but it was a shock because this other company had kept the prices down by not doing anything, so people are paying maybe a buck and a half a day for water. They'll pay that for a pint of water at the store.

You bring up a good point about the municipalities. You have to get your rate increases approved you know for the most part. Are you worried about that going forward that there might be push back?

DeBenedictis: Well, we get it approved by the state. Every state has a regulatory commission that regulates private companies. Municipal governments have no regulation. They can raise the prices because they are government themselves. We have not seen push back. We're still getting 10 to 10.5% return on equity awards on assets we put in and we earned that.

That's why our company is the number one earner of all the water utilities. So we just try and do the job the right way. We don't ask for more than we deserve but we don't ask for any less than we deserve and we're constantly putting in.

This year alone, we'll spend about $320 million dollars. We're only going to earn a little over $125, $130 (million). So you can see we're putting money back in the system. We're not harvesting and taking money out.

Edited for length and clarity.

Written by Debra Borchardt in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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