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Investment Opportunities

6 Water Stocks to Buy in 2021

As the U.S. population grows and people move around, demand for water ebbs and flows. Some areas are seeing new demand, and this is creating better investing opportunities. As a result, you might want to consider buying some of the top water stocks.

Adding a few of these companies to your portfolio might be a great move in the years ahead. The companies below are some of the best in the industry. They have steady cashflows and continue to reward shareholders.

Before we dive into each company, let’s look at the industry as a whole. There are many benefits to investing in water…

Why Invest in Water Stocks?

Oceans make up around 97% of Earth’s water. And on the surface, there’s an abundance. We also have desalination technologies to make it usable although they’re not nearly efficient enough and have some adverse impacts.

Researching earth's water supply and water stocks to invest in

Of the remaining 3% of the planet’s water, most of it is locked up in polar ice caps and other inaccessible areas. Less than 1% of the water on Earth is potentially usable for plants, animals and humans.

It’s a scarce resource, and growing populations are putting stress on our water infrastructure. The current global population sits at around 7.9 billion people, and that might climb to 9.8 billion in the next 30 years.

This is a huge trend, and it creates challenges to overcome. But with these challenges come opportunities. That’s why I’ve researched the best water stocks. Already, these companies are investing heavily in water technologies and water management. Governments around the world are also playing a larger role.

The regulations are creating barriers to entry… but also protecting the existing companies. As a result, water utility stocks can provide steady cashflows and dividends. To get a better idea of their potential going forward, let’s look at some company highlights.

Also, as a side note, the agriculture industry relies heavily on water. There are some unique benefits to investing in this industry. So here are some of the top agriculture stocks to consider as well. Now, without further ado…

Top Water Stocks

  • American Water Works (NYSE: AWK)
  • Essential Utilities (NYSE: WTRG)
  • American States Water (NYSE: AWR)
  • California Water Service (NYSE: CWT)
  • SJW Group (NYSE: SJW)
  • Middlesex Water Company (Nasdaq: MSEX)

American Water Works

Dating back to 1886, American Water Works has a long history of innovation and growth. It’s now one of the largest water companies in the world. Today, it provides water services for an estimated 14 million people in 46 states.

This geographic footprint provides diversification. It also helps create economies of scale. On top of that, the company continues to maintain its lead thanks to its innovative approach. It’s researching water treatment and distribution, wastewater treatment and collection, and biosolids management and energy management.

Advances in these areas have helped American Water Works grow. And it will likely continue for many years to come. Its track record and size make it one of the top water stocks to consider buying into.

Essential Utilities

Essential Utilities provides drinking water as well as wastewater treatment. It develops infrastructure and has many services. The company has stakes in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Indiana and Virginia.

Essential Utilities is one of the largest underground utilities in the U.S. It has about 29,000 miles of water, sewer and natural gas mains. The company spends nearly a billion dollars a year to replace pipe and utility infrastructure. This is helping to increase reliability and safety while improving the environment.

American States Water

American States Water has 50-year contracts with the U.S. government. This provides stability, and overall, the company has about 262,000 customers. On top of that, it provides electricity for roughly 24,500 customers.

With a growing base of customers, this is easily one of the top water stocks. It’s already produced great returns for investors, and management continues to deliver. This year, it expects capital spending to be $120 to $135 million. And roughly $20 million of that will be on environmental control facilities.

California Water Service

California Water Service serves more than 2 million people. And it reaches over 100 communities. It has five water service subsidiaries, which you’ll find in California, Hawaii, New Mexico, Texas and Washington.

California consumes the most water of all 50 states. And it’s followed by Texas. So California Water Service has tapped into some of the largest water markets. The recent California droughts are also increasing demand for better water management. This makes this company one of the best water stocks to consider buying.

SJW Group

SJW Group also delivers water to the California market. This is a water utility stock based in San Jose, California, although it also has subsidiaries in other states. And the company serves roughly 1 million people through 231,000 connections.

In 2020, the company invested about $200 million. This was to upgrade utility plant infrastructure, replace aging pipes, storage tanks and other facilities. This year, SJW plans to invest an additional $238 million in improvements to serve its customers. Efforts like these have helped the company pay dividends for 77 consecutive years.

Middlesex Water Company

Middlesex Water Company is the smallest of these water stocks. However, its business is strong, and it has a long track record of success. Founded in 1897, this utility company is based in New Jersey although it serves both New Jersey and Delaware markets.

Middlesex Water collects, treats and distributes water. It sells for domestic, commercial and municipal purposes. This is for both regulated and unregulated markets. Similar to the other companies on this list, Middlesex Water is investing to improve its business. It’s already completed a leak survey for 300 miles of water main. On top of that, it’s investing millions into replacing old equipment.

Investing in Water Stocks and More Resources

The water companies above are some of the best in the industry. As demand for water changes, these companies will continue to profit. They’re providing a vital service.

Buying a few of these water stocks might push your portfolio higher. However, it’s always important to consider the risks as well. Before investing, it’s good to do your own research and determine what makes sense for your portfolio.

If you’d like to see even better investing opportunities, sign up for Liberty Through Wealth. It’s a free e-letter that’s packed with tips and tricks from investing experts.


About

Brian Kehm double majored in finance and accounting at Iowa State University. After graduating, he went to work for a cryptocurrency company in Beijing. Upon returning to the U.S., he started working with financial publishers and also passed the CFA exams. When Brian isn’t researching and sharing ideas online, you can usually find him rock climbing or exploring the great outdoors.

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