Because of climate change, obtaining, treating, and distributing water has become a primary international industry.
Many experts in the field of climate change predict that droughts will become more regular in the future years. Water cost is expected to rise due to these occurrences. Therefore, some people think that desalinating large amounts of ocean water (which involves removing salt) will be essential to stabilize the world’s water supply.
No matter what occurs, demand will exceed the supply of the resource.
Since water technology is improving and the difficulty of the climate problem is likely to inspire discoveries, now is a wonderful moment to explore investing in water equities.
While most water companies are classed as utilities, a few also fall within the umbrella of consumer staples.
Keep reading to find out which five water stocks are now the finest investments for your portfolio.
American Water Works, Inc. (ticker: AWK)
Market cap-wise, American Water Works is around $28 billion, making it the most valuable water utility firm in the United States. Over 20 acquisitions and various infrastructure improvements, including a $3.4 million investment in its old Pennsylvania water pipes, contributed to the firm’s reputation for expansion in 2021.
The firm recently stated in August that it had acquired the water and wastewater systems serving around 4,000 customers in the city of Eureka, Missouri, and had begun work on a new water pipeline for the town. Earnings per share (EPS) for the quarter came in at $1.20, which was higher than the $1.14 predicted by analysts.
The current dividend yield is 1.7%, and the stock is far less volatile (beta = 0.43) than the market (as do most utility companies).
First Trust Water ETF (FIW)
FIW is an exchange-traded fund (ETF) that invests in equities across many market capitalizations. Companies listed on an exchange that generate a significant share of their earnings from the water and waste management sectors make up the index’s parts. Their selection is based on market capitalization, liquidity, and other specifications. Industry, utilities, and healthcare comprise more than 90% of the portfolio’s allocations.
Among FIW’s critical investments are infrastructure consulting company AECOM (ACM), water industry consulting and engineering services provider Tetra Tech Inc. (TTEK), and drainage and water industry equipment manufacturer Advanced Drainage Systems Inc. (WMS).
Primo Water, Inc. (PRMW)
Primo is a stock in the consumer staples sector known chiefly for its bottled water sales under the Earth2O, Crystal Springs, Sierra Springs, Mountain Valley, and Deep Rock brands. Additionally, commercial coffee and water dispensers, as well as filtration equipment, are offered for sale by the firm. Highland Mountain Water is the largest independent distributor of Primo’s Mountain Valley premium water brand, and the company was recently acquired by Primo.
The corporation also announced its intentions to become carbon neutral and end the use of single-use plastics in its first environmental, social, and governance (ESG) report.
Another significant event was the company’s decision to stop doing business in Russia, where it had been operating for the past five years. Still, it generated only $14 million in sales that year, or less than one percent of total revenue.
Ecofin Global Water ESG Fund (EBLU)
Multi-cap and blended fund EBLU aims to replicate the performance of the Ecofin Global Water ESG Net Total Return Index. Companies well-positioned to profit from efforts to address the water supply/demand gap make up the index. Eighty percent or more of the index’s market value must achieve a minimum ESG score. Companies must have at least 40% of their sales come from the water sector or be involved in the water industry to be included in the index. In addition, they need to have enough levels of both liquid assets and market capitalization.
Ferguson Plc (FERG: LON), a plumbing and heating goods distributor based in the United Kingdom, is one of EBLU’s most extensive holdings. Other significant investments include American Water Works Company and Veolia Environnement.
York Water Co
York’s expansion as a water provider is contingent on factors such as the number of new customers and the price of water and sewage. Since the corporation has no direct say over pricing, expanding to serve more people is its best bet for making a profit.
York Water has undertaken several acquisitions inside its service area to accelerate expansion. However, the region in which it operates is seeing relatively moderate economic development. As a result, the total client count grew from 71,411 in 2019 to 73,144 in 2021.
There was a 2.3% rise in sales to $55.1m in 2021. Additionally, the company’s operating margin is relatively healthy at 42%.
The payout ratio for York Water is close to 60%; thus, investors may expect dividend payments to continue unabated.