Water is an irreplaceable resource essential to sustaining life, and its value is increasing daily. With the growing population and the exponential increase in water demand, it is no wonder that many investors are turning towards water stocks to secure their future.
Although freshwater makes up only a tiny portion of the Earth’s total water supply, it is essential for drinking, sanitation, and creating and sustaining ecosystems on which all life depends—unfortunately, readily accessible freshwater accounts for less than one percent of the world’s water. In addition, the demand for water-intensive goods such as manufactured meat and dairy products also stresses global freshwater resources.
Despite these challenges, there are reasons to remain positive. For one, water is a renewable resource. Furthermore, advances in technology and innovation have made it possible to improve water distribution and purification, leading to greater efficiency and sustainability. As a result, investing in water companies in Canada can not only benefit your portfolio but also make a positive impact on the environment.
Let’s take a look at the best investments to gain exposure to water in Canada and globally.
What's in the Article:
- Best Water Stocks in Canada
- Brookfield Renewable Partners (BEP.UN.TO)
- Algonquin Power & Utilities Corp. (AQN.TO)
- Canadian Utilities Limited (CU.TO)
- Water Ways Technologies Inc. (TSXV: WWT)
- Current Water Techonlogies (WATR.V)
- Primo Water Corporation (PRMW.TO)
- H2O Innovation Inc. (HEO.V)
- Xebec Adsorption Inc. (XBC.V)
- Eguana Technologies Inc. (EGT.V)
- Clean Harbors Inc. (TSX: CLH)
- Should I Invest in Canadian Water Stocks?
- Are there any Water ETFs in Canada?
- US Water Stocks
- The Bottom Line:
Best Water Stocks in Canada
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.
First, let’s cover some large-cap stocks to gain exposure to water. They are based on business model strength, current dividends, and potential growth. Then we’ll shift to smaller companies doing innovative things in the water and water treatment industry.
Brookfield Renewable Partners (BEP.UN.TO)
Brookfield Renewable Partners is one of the world’s largest publicly traded renewable power platforms, with a diversified portfolio of renewable power generating facilities across North America, South America, Europe, and Asia, including hydroelectric power plants. In addition, BEP.UN.TO has a significant presence in the hydropower industry, with a portfolio of over 200 hydropower facilities across North and South America, Europe, and Asia, representing over 6,000 MW of installed capacity. These facilities include run-of-river, storage, and pumped storage hydropower plants.
Hydropower is a clean and renewable energy source that produces electricity by converting the kinetic energy of flowing water into electricity. BEP.UN.TO’s hydropower facilities provide a reliable source of electricity with low greenhouse gas emissions, making them an attractive investment option for environmentally conscious investors.
Algonquin Power & Utilities Corp. (AQN.TO)
Algonquin Power & Utilities is a renewable energy and regulated utility company that owns and operates a diverse portfolio of renewable power generating facilities and utility distribution networks, including hydroelectric power plants. AQN.TO’s hydroelectric facilities are located in the United States and Canada and represent a significant portion of its renewable energy portfolio.
AQN.TO has also invested in water-related infrastructure assets, including wastewater treatment facilities and water distribution networks.
Canadian Utilities Limited (CU.TO)
Canadian Utilities Limited is a diversified energy and services company that owns and operates regulated utilities, energy infrastructure assets, and energy-related businesses across Canada and internationally, including hydroelectric power plants. CU.TO’s hydroelectric facilities are located in Alberta, British Columbia, and Quebec, representing a significant portion of its renewable energy portfolio.
In addition to hydroelectric power, CU.TO is involved in several water-related businesses, including water treatment and distribution networks, making it a diversified investment option in the water and energy sectors.
Water Ways Technologies Inc. (TSXV: WWT)
With a market capitalization of around CAD 22 million, Water Ways Technologies is a Canadian small-cap company specializing in developing and implementing agricultural irrigation systems. The company operates in several countries, including Canada, Israel, Greece, Bulgaria, and Romania, and has a strong track record of delivering innovative irrigation solutions to its clients. Water Ways Technologies has reported consistent revenue growth in recent years, with its revenue increasing from CAD 6.8 million in 2017 to CAD 11.6 million in 2020.
Furthermore, the company has been actively pursuing growth opportunities through strategic partnerships and acquisitions, which could help it expand its market share and enhance its competitive position in the industry.
Current Water Techonlogies (WATR.V)
Water Ways Technologies Inc. (WATR.V) is a Canadian-based technology company specializing in water irrigation systems and treatment solutions. The company has provided innovative agriculture, horticulture, and landscaping solutions since 2012. Their proprietary irrigation technology, the ARID system, is designed to help farmers conserve water by up to 70% while increasing crop yield.
Water Ways Technologies mainly focuses on the cannabis industry, providing irrigation systems and water treatment solutions for licensed cannabis growers globally. The company has established itself as a key player in the cannabis industry and has a strong presence in the Canadian market. Their solutions help cannabis growers optimize production, reduce costs, and maintain consistent quality.
With the increasing demand for water conservation and sustainable agricultural practices, Water Ways Technologies is poised for continued growth in the future. The company has a strong track record of innovation and is well-positioned to capitalize on the growing need for water-efficient irrigation and treatment systems.
Primo Water Corporation (PRMW.TO)
Primo Water is a water solutions provider operating in the United States and Canada. The company provides water dispensers, purified bottled water, and water filtration systems to residential and commercial customers. With a market cap of approximately CAD 300 million, Primo Water has shown steady revenue growth over the past few years, which could make it an attractive investment for those interested in the water industry.
H2O Innovation Inc. (HEO.V)
H2O Innovation provides water treatment solutions and services to various industries, including municipal, industrial, and commercial customers. The company has a market cap of approximately CAD 170 million and has shown steady revenue growth over the past few years. H2O Innovation’s focus on water treatment and its growing market position in Canada and the United States could make it a solid investment for those interested in the water industry.
Xebec Adsorption Inc. (XBC.V)
Xebec Adsorption provides clean energy solutions, including natural gas and hydrogen purification systems, biogas upgrading systems, and renewable natural gas systems. The company’s products have applications in the water treatment industry, specifically in wastewater purification and clean water production. With a market cap of approximately CAD 350 million, Xebec Adsorption has been showing strong revenue growth over the past few years, which could make it an attractive investment for those interested in the water industry.
Eguana Technologies Inc. (EGT.V)
Eguana Technologies is a clean energy technology company that produces energy storage systems for residential and commercial customers. The company’s products have applications in the water industry, specifically in the storage and distribution of clean water. With a market cap of approximately CAD 120 million, Eguana Technologies has been showing steady revenue growth over the past few years, which could make it an attractive investment for those interested in the water industry.
Clean Harbors Inc. (TSX: CLH)
Clean Harbors is a leading provider of environmental, energy, and industrial services, including waste management, environmental consulting, and industrial cleaning services. The company has a significant presence in Canada, with several facilities nationwide. Clean Harbors has a market capitalization of around CAD 6.7 billion and has reported consistent revenue growth in recent years, increasing its revenue from CAD 2.8 billion in 2017 to CAD 3.7 billion in 2021. The company has a diversified customer base across several industries, including oil and gas, manufacturing, and healthcare, which could provide stability in challenging market conditions. Furthermore, Clean Harbors has been actively pursuing growth opportunities through strategic acquisitions, which could help it expand its service offerings and enhance its competitive position in the industry.
Resource production and extraction companies like mining use a lot of water for their operations and are often only responsible for remediation but not usage; this is a huge issue.
Should I Invest in Canadian Water Stocks?
Investing in water companies in Canada may present ethical concerns for investors with certain personal convictions, as water stocks can potentially contribute to environmental harm. However, there are several ways to invest in water-related industries in Canada, such as buying stocks of water companies or investing in water-focused exchange-traded funds (ETFs).
The TSX has several stocks tied directly to water, such as Primo Water. However, if you are open to investing in US securities, you can access a much richer and more dynamic pool of water stocks, so it may also be worth exploring these options. One option for investing in water globally is the Invesco Global Water ETF (CWW), which gives Canadian investors exposure to 50 water industry stocks from developed markets worldwide.
Furthermore, many Canadian corporations provide water treatment solutions and technologies to combat water shortages and challenges. Investing in these water-focused solutions providers could potentially result in a bright future.
It is important to note that there are few pure-play water companies, with conglomerates that oversee broad business units controlling much of the innovative technology in the space and heavily regulated utilities doing the buying, selling, and treating. Therefore, investors may need to look beyond traditional water companies to find suitable investment opportunities.
As with any investment, it is crucial to consider your portfolio, investment goals, and risk tolerance. In addition, it is recommended to do your research and seek the advice of a financial professional before making any investment decisions.
Are there any Water ETFs in Canada?
Yes, there are several water ETFs available for Canadian investors. One such ETF is the iShares S&P Global Water ETF (CWW-T). This ETF is designed to provide exposure to the global water sector and includes 50 issuers from developed markets selected based on the relative importance of the global water industry within their business models. It also provides exposure to different water industry segments, including water utilities, infrastructure, and water equipment and materials companies.
Many more Water ETFs are available, a great way to get stable exposure to this precious resource.
US Water Stocks
As we mentioned, American companies are more involved in water as a commodity rather than downstream value. Here are the top US water stocks.
Global Water Resources (GWR)
Global Water Resources is a water management company that facilitates the distribution of fresh water and wastewater. It began as a relatively 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. Over the past five years, its annual revenue has shot up by about 34%. In addition, the company relies heavily on M&A; thus, its higher share prices have created a positive feedback loop.
Several years ago, Global Water Resources bought the Red Rock utility, primarily serving 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 creating 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 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%
The York Water Company (YORW)
This investor-owned company operates in Pennsylvania and provides clean water and wastewater facilities to 48 municipalities. It operates two 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 growth in its EPS (with a 10-year CAGR of 6.7%)
Using York Water’s predictable business model, the dividend-per-share is expected to increase by 4% over the next five years. And, given the company’s steady cash flows and uninterrupted supply throughout The Great Depression, it will likely remain unaffected by the COVID-19 pandemic.
In 2020, they installed 77,300 ft of water main; their 5-year average installation has increased to 73,800 ft per year. They also rebuilt the pumping station at the 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%
Essential Utilities Inc (WTRG)
Essential Utilities Inc is one of the most significant publicly traded water, wastewater, and natural gas distributors in the United States. It serves approximately 5 million people across ten 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 ten 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 opened 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%
California Water Services Group: (CWT)
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 averages around $150 million. Over the last ten years, they have grown their earnings-per-share at an average annual rate of 4% and are expected to continue growing as they had done in the past.
For investors, their earnings growth is undoubtedly 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, 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%
American Water Works Company (AWK)
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 market-based businesses: the military services group, which 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, American Waters seems to be a profitable venture worth scrutinizing. Moreover, it features a healthy payout 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%
Investing in water stocks in Canada can be challenging due to the lack of pure-play water companies, with many conglomerates and regulated utilities controlling much of the technology and infrastructure in the sector. However, investment opportunities are still available for those outside traditional water companies.
One way to invest in water is through exchange-traded funds (ETFs) such as the iShares Global Water Index ETF, which tracks the performance of the S&P Global Water Index, a group of companies involved in water utilities, infrastructure, materials, and equipment. Another option is the Invesco Water Resources ETF, which focuses on companies producing water conservation and purification products.
Investors may also consider investing in companies with water-related assets on their balance sheet, such as York Water Company (YORW) or American States Water Company (AWR), which provide drinking water and wastewater services, respectively. American Water Works (AWK) is another option, as it is one of the largest water and wastewater utility companies in the United States, with a significant presence in Canada.
It is important to note the value of water as a precious resource and the need for sustainable management. Investing in companies that focus on improving access to water or developing innovative water-saving technologies can contribute to addressing water scarcity challenges while generating financial returns for investors.
While pure-play water companies may be scarce in Canada, there are still opportunities to invest in the water sector through ETFs and companies with water-related assets. Doing so can support the sustainable management of this precious resource.