Water stocks are equities that are closely associated to the irrigation, utilities, water treatment, or other water-related industries. Individual firms’ stocks can be purchased, or a mutual fund or ETF with a large exposure to water stocks can be purchased.
Is water an excellent investment?
Water is a valuable commodity used across the economy since it is a limited resource with a finite quantity. Investing in water-related companies or index funds that invest in them can help investors take advantage of the expanding trends in water renewal, conservation, treatment, and purification.
Invest in individual water stocks
You would acquire shares of a specific firm, such as American Waterworks, Inc., The Danaher Corp., or PepsiCo, if you wanted to invest in individual water stocks.
Individual stock investments can help you earn higher profits, but they also come with a higher level of risk.
Because the stock market is so volatile, investing in individual equities can result in substantial gains and losses.
This strategy is suitable for those who have a high risk tolerance and can afford to ride out market swings.
Invest in ETFs
A professionally managed exchange-traded fund (ETF) is a portfolio of stocks, bonds, and other securities.
An ETF can contain dozens, if not hundreds, of different investment kinds, allowing you to diversify your portfolio.
For example, the Invesco S&P Global Water Index ETF (CGW) allows you to invest in a variety of water utility, technology, and bottling companies all at once.
ETFs are generally considered to be a safer investing option. There’s less risk of a single corporation ruining your investment if you diversify your investments.
ETFs typically have lower returns than individual stocks. Investing in ETFs may be a better option if you are risk averse.
Michael Burry’s water investment strategy
“What became evident to me is that investing in water through food is the best way to go. To put it another way, cultivate food in water-rich places and move it to water-scarce areas for sale. This is the least problematic approach for allocating water, and it can be profitable in the end, ensuring that the redistribution is long-term.”
Take, for example, the humble almond. Burry is betting on a nut that needs five litres of water per seed and is growing in popularity. They use 10% of the available agricultural water in California, where they cultivate 80% of the world’s almonds. So it makes logical and financial sense to produce almonds outside of drought-affected areas and transport them back in.
Companies are waking up to these new realities across the board. Diageo, a drinks company, reduced its water consumption by about 1 million cubic meters between 2013 and 2014, while Lafarge, a cement company, conducts risk assessments of its river basins in the locations where it operates. SABMiller, the brewer, has cut its water usage “Levi-Strauss, known for their jeans, now uses 96 percent less water than it did just a few years ago, reducing its “carbon footprint” by nearly 20 percent.
What constitutes a good water supply?
This post highlights our top 7 water stocks today, which we cover in the Sure Analysis Research Database, in addition to the Excel spreadsheet above.
The best 7 water stocks will be discussed in this article, which will be ranked based on a qualitative combination of their business model quality, present dividend yield, and future dividend growth potential.
Water Stock #7: California Water Service Group (CWT)
California Water Service includes six subsidiaries that serve around 2 million people, primarily in California but also in Washington, New Mexico, and Hawaii.
California Water Service has grown its dividend for over 50 years, earning it the title of Dividend King.
Water Stock #6: The York Water Company (YORW)
A corporation with two very distinct traits is ranked sixth among our best water stocks.
First, the York Water Company is the country’s oldest investor-owned water provider, having been in operation since 1816.
Second, the company has one of the best dividend payout records in the industry. The York Water Company has a remarkable track record of paying dividends to stockholders for almost 200 years.
Water Stock #5: Essential Utilities, Inc. (WTRG)
Essential Utilities is the country’s second-largest publicly traded water company, with over 5 million customers spread across ten states.
Essential Utilities has increased its dividend for 30 years in a row, earning it a spot on the Dividend Champions list.
Water Stock #4: Algonquin Power & Utilities (AQN)
Under the ticker AQN, Algonquin Power & Utilities Corp. trades on the Toronto Stock Exchange and the New York Stock Exchange. In 1988, the renewable energy and utilities firm was created. Since 2011, the corporation has boosted its dividend every year.
Regulated utilities (natural gas, electric, and water), non-regulated renewables (wind, solar, hydro, and thermal), and global infrastructure are the three parts of its business.
Algonquin has over 1 million connections, mostly in the United States and Canada. It also has renewable and clean energy facilities that are mostly (more than 90%) covered by long-term contracts that include inflation escalations.
This stock stands out among water stocks since it has the highest dividend yield.
Water Stock #3: Ecolab (ECL)
Due of its long history of success, Ecolab is one of the best water stocks. Ecolab has increased its dividend for 35 consecutive years, earning it a place among the Dividend Aristocrats.
Merritt J. Osborn, the company’s founder, founded Ecolab in 1923 with the invention of “Absorbit,” a novel cleaning product. This product cleaned carpets without requiring enterprises to stop activities in order to clean them.
Economics Laboratory, or Ecolab, was founded by Osborn as a firm centered on the product.
Water Stock #2: American Water Works Company, Inc. (AWK)
In terms of operational revenues and population serviced, American Water Works is the largest and most geographically diverse publicly traded water and wastewater utility corporation in the United States.
Over 15 million people in 46 states rely on the corporation for drinking water, wastewater, and other associated services. It has a long-term competitive advantage due to its industry-leading scale.
Water Stock #1: American States Water Company (AWR)
Utilities (mainly water, with some power) and Services are the two business segments of American States Water (wastewater services on several US military bases).
The corporation is headquartered in California, where it conducts business in the utilities sector. It’s a Dividend King, too.
Because it has the longest history of yearly dividend increases, AWR is the top-ranked water stock. It also has a high dividend safety rating.
Final Thoughts
Water could be one of the most important investment issues in the coming decades. The need for water will only increase in the future as the world’s population grows.
And, because water is a need of human life, demand for water should remain strong even during the worst economic downturns.
Water equities should therefore be considered by youthful investors with a longer time horizon, such as Millennials.
Water stocks are appealing to risk-averse investors seeking stability in their stock purchases because of these considerations.
At this moment, not all of the water stocks on this list have buy recommendations, as some appear to be overvalued. However, all of the water stocks on this list pay dividends and are expected to continue to do so for many years.
- Monthly Dividend Stocks: Payouts are paid every month for a total of 12 dividends each year.
Will water supplies increase?
Despite business difficulties caused by the ongoing COVID-19 epidemic, the two water stocks are predicted to boost sales by an average of 9+ percent in 2022. That may not appear to be much. However, most water firms were not growing at all until a year or two ago.
Middlesex, like most utility equities, provides a dividend (just over 1%), whereas Tetra offers a 0.5 percent dividend. With the possibility of a market correction looming amid rising inflation fears, utilities and infrastructure are a smart hedge against impending volatility.
The water crisis is on Wall Street’s radar, and financial firms are investing in efforts to address it. Let’s hope it’s solved sooner rather than later, just with the coronavirus.
Until then, you can profit by investing in firms that are attempting to solve the problem.
Is water traded on the stock exchange?
Water has joined the ranks of gold, oil, and other commodities traded on Wall Street, as concerns about its future availability grow. The first of its type in the United States, the Chicago Mercantile Exchange opened a water trade market with $1.1 billion in contracts related to California water prices. Farmers, hedge funds, and municipalities have been able to hedge against future water shortages in California because to this market. The new program was launched in October 2020 in response to the region’s extreme heat, wildfires, and droughts. While treating water as a marketable commodity may reduce price uncertainty, it also places essential human rights in the hands of financial organizations and investors.
Who is the most powerful water company?
American Water Works is the country’s largest publicly traded water company. It serves more than 14 million people in 46 states with drinking water, wastewater, and other related services, making it one of the country’s most geographically diverse suppliers.
It has a sizable military services division that owns and maintains water and wastewater facilities on US military bases across the country.