Best Water Stocks in Canada & US
Water scarcity is probably one of the reasons why water stocks perform so well. As a result, the water market utility stocks run well throughout the year and frequently outperform the market. Here are just some of the few that made it to the list. They are based on business model strength, current dividend, and potential growth.
1. Global Water Resources (GWR: TSX)
Global Water Resources is a water management company that facilitates the distribution of fresh water and wastewater. It began as a fairly small water utility operating primarily in Maricopa, Arizona, and it provides recycling utilities to treat and disinfect wastewater. In addition, it supplies water to the regions which need them most, places where water is scanty. This is to encourage growth and sustainability. As of 2021, it served 66,000 people living in 24,000 homes.
It is exciting because it pays monthly dividends. This, for an investor, is a sign that the company has steady cash flow and total return predictability. Its annual revenue has shot up over the past 5 years by about 34%. The company relies a lot on M&A, and thus their higher share prices have created a positive feedback loop.
Several years ago, Global Water Resources bought the Red Rock utility, which primarily served one subdivision north of Tucson, Arizona. For a purchase price of just $5.9 million, Global Water Resources made 1,654 new connections and thus making more than $1 million in annual revenues upfront.
Global Water Resources stock opened at $20.28 after a previous close of $20.21. The latest price was $20.23. Besides being listed on the NASDAQ, it also has a trailing 12-month revenue of around USD 40.7 million.
Here are some essential details:
- Market capitalization: $457.6M
- P/E ratio: 172.91
- PEG ratio: 0.12
- Dividend Yield: 1.45%
2. The York Water Company (YORW: NSD)
This investor-owned company operates in Pennsylvania and provides clean water and wastewater facilities to 48 municipalities. It operates 2 wastewater collection systems and five treatment systems with two reservoirs (Lake Williams and Lake Redman). Founded in 1816, it is the oldest water utility company in the United States.
But that is far from the most remarkable detail as this company has a gleaming track record. It has an impressive record of more than 200 years of uninterrupted dividend payments to shareholders with a consecutive 24-year annual dividend increase. As of late, The York Water Company has had a steady increase in its EPS (with a 10-year CAGR of 6.7%)
Using York Water’s predictable business model, it is expected that the dividend-per-share will proceed with an increase of 4% over the next 5 years. And, given the company’s steady cash flows and uninterrupted supply even throughout The Great Depression means that it will likely remain unaffected by the COVID-19 pandemic.
In 2020, they installed 77,300 ft of water main, and their 5-year average installation has increased to 73,800 ft per year. They also rebuilt the pumping station at Susquehanna River.
The York Water Company stock opened at $52.95 after a preceding close of $52.71. The latest price was $52.40. It currently has a 0.76 debt-equity ratio.
Here are some essential details:
- Market capitalization: $686.09M
- P/E ratio: 41.26
- PEG ratio: 1.27
- Dividend Yield: 1.42%
3. Essential Utilities Inc (WTRG: US)
Essential Utilities Inc is one of the largest publicly traded water, wastewater, and natural gas distributors in the United States. It is currently serving approximately 5 million people across 10 states (including Pennsylvania, Ohio, North Carolina, Illinois, and Texas) under brands such as Aqua and Peoples.
The company has raised its dividends for the past 29 years. In addition, it has paid quarterly dividends consecutively for the past 76 years, making it a contender for the Dividend Champion List. So far, the company has maintained earnings-per-shares at a CAGR of around 7.4%, and the company is expected to grow, on average, by 7% annually.
You can comprehend its unprecedented growth from the fact that from 1993 to 2013, Aqua America (a subsidiary of Essential Utilities) completed 300 major acquisition projects. In the last 10 years alone, the company has purchased nearly 200 smaller private utilities and closed several acquisitions and ventures. In addition, it is planning to expand southward as dictated by its business model.
In 2018, Aqua purchased Peoples Natural Gas in Pittsburgh for $4.27 billion and began establishing itself as a gas utility. It currently has a payout ratio of 60% and a dividend growth rate of 7% annually, and, at this trajectory, the 5- year average will grow at a similar rate.
Essential Utility stock made an open at $50.39 after a previous close of $50.54. The latest price was $50.36. Essential Utilities is listed on the NYSE and has a trailing 12-month revenue of around USD 1.8 billion.
Here are some essential details:
- Market capitalization: $12.37B
- P/E ratio: 30.33
- PEG ratio: 1.66
- Dividend yield: 2.12%
4. California Water Services Group: (CWT: NYSE)
California Water Service is the fourth-largest publicly-owned water utility in North America and, through its subsidiaries, provides water utility services in California, New Mexico, Washington, and Hawaii. It provides water to over 2 million people.
California Water Services has seen an increase in dividends for 50 consecutive years, and its quarterly revenue is averaged around $150 million. Over the last 10 years, they have grown their earnings-per-share at an average annual rate of 4% and is expected to continue growing as it had done in the past.
For investors, their earnings growth is certainly promising. If that’s not enough, the CEO’s pay is quite reasonable, and insiders are well invested (proffering a considerable share price) and the shareholders. The takeaway is that California Waters is worth keeping an eye on. They have paid 50-70% of their profits throughout the past decade, and with predictable earnings, it means that the dividend seems to be secure. Their 54-year consistent dividend increase can certainly vouch for that.
Their most recent endeavour involves water-saving and infrastructure upgrading programs to combat drought and provide residents with a safe and reliable water supply.
California Water Service Group stock opened the day at $64.28 after a previous close of $64.53. The latest price was $57.96. California Water Service Group, listed on the NYSE, has a trailing 12-month revenue of around USD 854.1 million.
Here are some essential details:
- Market capitalization: $3.365B
- P/E ratio: 22.32
- PEG ratio: 2.92
- Dividend Yield: 1.43%
5. American Water Works Company (AWK: NYSE)
Established in 1886, this is one of the oldest and most geographically diverse publicly owned water and wastewater utility companies in the United States and Canada. American Water’s many facilities are provided locally by their subsidiaries and through the States in which they operate. The company provides freshwater, wastewater, and other services (such as water and sewer line protection) to 15 million people across 46 different states. Its business regulates 53,000 miles of pipes, 609 water treatment plants, 150 wastewater facilities, and 75 dams.
The company has two particular market-based businesses: the military services group that operates water systems for the US military and the homeowner services business, which supplies water utilities to commonfolk. As a result of being affiliated with the military, they have expanded their sphere of influence without much risk.
American Water Works has a solid and robust track record of profitability and dividend payments. The company’s predictable business model suggests growth in EPS by 7-10% and 1.5-2.5% from acquisitions over the next few years. Also, the quarterly dividend increases are expected to grow by 9% annually, given the company’s profitability.
With their steady cash flow and tight connections with the military, it would seem that American Waters would be a profitable venture and is worth scrutinizing. Moreover, it features a healthy pay-out ratio of 57%.
American Water Works Company stock opened the day at $184.01 after a previous close of $184.00. The latest price was $188.75. American Water Works Company, listed on the NYSE, has a trailing 12-month revenue of around USD3.9 billion.
Here are some essential details:
- Market capitalization: $34.257B
- P/E ratio: 45.72
- PEG ratio: 4.13
- Dividend Yield: 1.28%
The Bottom Line:
Of course, there will be some discrepancies, and just because utility stocks are performing well now doesn’t mean that they always will. Also, note that this does not constitute a recommendation to buy or sell any stock and does not consider your objectives or your financial situation. We only aim to provide you with the latest news and keep you up-to-date on potential investment opportunities.
Water Stocks TSX
The TSX Venture Exchange has not reviewed this release and does not accept responsibility for the accuracy or the adequacy. Forward-looking statements are subject to risks, uncertainties and other factors which could cause Current Water Technologies Inc. and its results to differ materially from expectations.
Established as an operating division of Current Water Technologies Inc. (“Current Water Technologies”), Pumptronic continues to serve as an integrated manufacturer of pumping stations specializing in custom design and automation, and its common shares are traded on the Tier I Wills TSX Venture Exchange under the symbol “WATR.”. Alkaline Water Co., Inc. was founded on June 6th, 2011, by Richard A. Wright and is headquartered in Scottsdale, AZ. Current Water Technology is a technology company that uses its patented and proprietary electrochemical technology to treat wastewater, desalination water and drinking water contaminated with metals, nutrients, nitrates and ammonia related to mining, metal processing, chemical, agricultural and municipal waste management.
Artesian Water Company, its principal subsidiary, delivers 7.3 billion gallons of water annually through 1,301 miles of water pipes to more than 300,000 people. Through its subsidiary, the Golden State Water Company, it provides water services to 258,000 customers in 75 communities in 10 counties in northern, coastal and southern California. The company also distributes electricity to more than 24,000 customers in Big Bear and nearby areas in San Bernardino County, California.
The company’s offerings support energy-efficient technologies for energy storage, power generation, distribution and conversion. Through its subsidiary, American State Utility Services Inc., it provides water and wastewater management services to military bases across the nation under a 50-year privatization agreement with the United States. The ISHARE Global Water (UCIT) ETF offers broad exposure to water-related companies.
The iShares Global Water UCIT ETF invests in the 50 largest global water companies and tracks their performance. This means that the fund has stable water stocks and fewer risks due to its diversification.
While water ETFs are the best way for private investors to get involved in the wider water sector, individual water stocks are riskier, Dan Deming, managing director of Chicago-based KKM Financial LLC. In a curious reversal, Deming said that individual water companies pose a higher risk than investments in water funds because of the reduced market value of water. His recommendation to investors is to limit the holdings of water ETFs to 10 percent of the total portfolio.
While water is not an asset class, it is held in several asset classes, including staples, consumer goods, infrastructure, information technology, utilities, healthcare, and industry. For example, two companies holding the five water ETFs in North America traded Xylem Inc. (Danaher Corp.) Danaher is classified as an industrial stock because it manufactures water treatment plants. Danaher can also be considered a healthcare company because it manufactures technologies that treat water for medical applications.
Large quantities of water, ice and steam are used to cool and heat industries and households. Much of the long-distance trade in raw materials such as oil and natural gas and finished products is carried by boat across seas, rivers, lakes and canals. In addition, fisheries, salt and freshwater waters are important food sources in many parts of the world.
Water is a coveted commodity, and investing in water resources is a way to diversify your portfolio and lead to life-changing prosperity. But, unfortunately, only 1% of the world’s freshwater is accessible. Just as much of it is in glaciers, only 0.007% is available to the billions of people and animals on Earth.
Water is a valuable commodity, and when governments fail to provide people with clean water, they have to ask companies to help solve the problem, and that is where your investment comes in. Investing in water supplies is a way to support companies trying to solve the looming water crisis and could prove to be a good investment. So Burry bought water rights, invested in water-rich farmland, and invested in a water utility.
There is not a single crystal ball, so it is impossible to know with certainty where water prices will go in 2021. In addition, mergers and acquisitions (M & A) could also affect the share price of water stocks. As a result, buying Canadian water stocks is not as easy as it is for US investors.
For example, if a company bids at a massive premium, it can leak into others. A bid for a water company can reset valuations attributed to the industry. One of the fastest-growing topics in M & A has been the involvement of private equity in the development of water resources in recent years.
This top-down approach is a way for individual investors to position their portfolios to access new, high-growth sectors as part of a broader balanced investment strategy.
In recent years, the view of water has changed dramatically due to the scarcity in many parts of the world. The only viable way to finance the replacement of ailing infrastructure in developing countries with new infrastructure in these areas is to assign a realistic value. While this may not be great for consumers’ “monthly water bills,” it offers an excellent opportunity for investors to look at water supplies. Unfortunately, as we have already said, the global water sector is poorly defined, making it difficult for discerning institutional investors to find a clean way to engage in the sector.
Veolia has built over the past 20 years more than 250 water and wastewater treatment plants in the Asia-Pacific region, making it one of the company’s largest markets for water resources. In addition, in 2016, Veolia extended its contract with Milwaukee Metropolitan Sewage District for ongoing wastewater collection and treatment.