Many of us who read this will be unaware of the global situation. But if the current patterns continue, it won’t be long until it hits home for all of us. The majority of us discovered in primary school that seawater makes up 97% of the world’s freshwater. Additionally, just 1% of the available water can be drank.
Math like that is getting harder and harder all throughout the world. Water levels have fallen to historically low levels as a result of a severe, multi-year drought.
Additionally, the federal government has threatened to reduce water consumption by 25% in Arizona, California, and Nevada—the three states most impacted.
We will all likely see increased food prices even if there are no water restrictions. One explanation for this is the fact that California provides around 25% of the country’s food supply. According to a poll by the American Farm Bureau Federation, 40% of farmers sold off some of their cow herds in 2021.
However, possibilities do arise in times of crisis, so this is not different. In this special presentation, we examine seven water stocks that appear to be wise purchases as the globe searches for answers.
Best 7 Water Stocks
- American Water Works
- Essential Utilities
- American States Water Company
- Danaher
- Pentair
- Mueller Industries
- Xylem
1. American Water Works (NYSE:AWK)
One of the top water utilities in the nation is at the top of this list of water stock companies. In each of the previous 20 quarters, American Water Works (NYSE:AWK) has exceeded or surpassed analysts’ estimates for earnings per share (EPS). Even while it cannot be stated for income, the corporation gains from the fact that people must pay their water bills.
The balance sheet profit margin for American Water Works is 3.99%, which is roughly double the sector average. The company’s price-to-earnings (P/E) ratio is now 21x earnings due to the recent decline in the price of AWK stock, which should be readily sustained by the company’s revenue projections over the next five years.
Dividend investors like investing in utilities. The 1.72% dividend yield offered by the corporation won’t thrill many investors. Its yearly dividend of $2.62 is much greater than the sector average of $1.81, though. And for the past 14 years, the corporation has raised its dividend every single year.
2. Essential Utilities (NYSE:WTRG)
Essential Utilities (NYSE:WTRG) is not a pure play water stock, in contrast to American Water Works. That’s because Aqua America and Peoples Natural Gas, which operates under that name, are subsidiaries of Essential Utilities. The WTRG stock price, which has never quite reached its pre-pandemic level, reflects the fact that the natural gas market is more volatile than the water market.
Leaving that aside, the business operates in eight states and has a healthy financial sheet. When compared to the larger sector, the business is selling at a valuation of little under 30x earnings. A dividend aristocrat, Essential Utilities has grown its dividend every single year for the past 32 years. And the company’s forecast profits growth of around 7% over the following five years supports its present dividend yield of 2.29%.
3. American States Water Company (NYSE:AWR)
American States Water Firm is the last utility company on this list (NYSE:AWR). American States Water is not a pure play water stock, similar to Essential Utilities.
Additionally, the business purchases and sells power through its network of nine states.
Location is important, much like many services. And one of California’s biggest water utility corporations is American States Water. About 260,000 people are served by the business in 80 cities throughout California. That represents around 25% of the whole consumer base.
AWR stock has increased 73% during the past five years. The stock has also increased 17% from the market’s low point in June. Along with that, the business has grown its dividend for at least 50 years running, making it a dividend king. American States Water, in this instance, has increased its payout for 62 years running.
4. Danaher (NYSE:DHR)
The following business on this list is likewise not a water-only business. The industrial firm Danaher (NYSE:DHR) is quite varied. But one of the sources of income for the business is the sale of water testing tools.
This contributes to resolving the issue of the about 33% of people worldwide who lack access to clean drinking water. Additionally, it expands the company’s addressable market. And according to some estimates, that segment generates close to 10% of the business’s revenue, which is increasing both sequentially and annually.
Both the company’s sales and earnings are anticipated to increase by about 5% during the following five years. However, the company’s revenue may approach its historical 12% annual sales growth if water proves to be the engine that it is anticipated to be.
The 15% decline in DHR shares so far this year puts it on par with the S&P 500. However, MarketBeat’s analysts continue to give Danaher a Moderate Buy recommendation. The $324 price objective set by the same analysts for DHR stock represents a roughly 16% increase over current prices.
5. Pentair (NYSE:PNR)
With regard to our worldwide water supply, Pentair (NYSE:PNR) is seeking to address two of the present problems. The requirement for home filtering comes first.
A countertop water filtering device called the Pentair Rocean Reservoir was just released by the firm.
This method not only contributes to cleaner tap water but also lessens the need for disposable water bottles. This might be a major motivator as businesses work to reduce the use of plastic bottles as part of a more sustainable strategy.
Pentair trades for about 13 times earnings and has one of the strongest profit margins in its industry. However, in 2022, PNR stock is down by around 37%. However, if the company has formed a bottom around its 52-week low, investors may be rewarded with a stock that has a price target of $64.91 from analysts whose performance is tracked by MarketBeat, representing a 42% increase.
6. Mueller Industries (NYSE:MLI)
Investing in water equities through a picks-and-shovel firm like Mueller Industries is a more “boring” option (NYSE:MLI). Mueller, though, demonstrates that dull may be lovely. The business produces the fittings, valves, and pipes needed for both residential and commercial water systems. Fire hydrants are also sold there.
Over the past year, the company’s earnings and revenue have both increased significantly. And the stock price of the firm, which has increased by 44% over the last year and is projected to increase by around 10% in 2022, reflects this.
MLI stock still has a favourable price of just over 5x earnings despite this gain. Additionally, during the following five years, the business anticipates double-digit profits and sales growth.
7. Xylem (NYSE:XYL)
The last stock on our list is held by a business that is making an effort to employ technology to solve the growing worries about water shortage. By 2025, “1.8 billion people will live in nations or regions with absolute water shortage,” predicts Xylem (NYSE:XYL).
The objective of the organisation, which is to create technological applications for the water and wastewater management sectors, becomes even more urgent as a result. The business “offers hundreds of solutions supported by a thorough, integrated portfolio of services geared to maintain the performance of water and wastewater treatment equipment.”
Leaky pipes are one of the major issues that Xylem may assist in resolving. This is especially crucial in light of an outdated infrastructure. Since the 1970s, the typical water main in the US hasn’t been replaced.
Nevertheless, the XYL stock has lost 22% of its value this year, and according to analysts’ consensus price targets polled by MarketBeat, the stock might rise by roughly 9%. Nevertheless, Xylem may be a strong long-term bet for patient investors given that the firm is expected to record double-digit sales growth over the next five years.
