Key Takeaways
☑️ Water is one of the most precious resources
☑️ We check out the 10 best water stocks – with dividends!
☑️ Water is a highly competitive industry with low margins
☑️ Valuations are also rather high, making it not easy for investors!
Why Invest In Water Stocks?
Much like gold, water is a precious resource that holds substantial value. As global water scarcity becomes more apparent, its scarcity translates into increasing demand and, subsequently, should result in rising water prices.
This potentially presents investors with a promising opportunity as the value of water stocks ‘might’ appreciate significantly over time.
What are the 10 leading water stocks? Can we find any gems we can put in our portfolios and keep them for decades to come?
Let’s take a closer look!
Types Of Water Companies
Water stocks are investments in companies generally operating in the water industry.
These companies are primarily involved in the treatment and distribution of water, wastewater management, and water infrastructure development.
We can broadly categorize water stocks into three buckets:
1. Water Utilities
These companies provide water and wastewater services to residential, commercial, and industrial customers. They own and operate water treatment plants, distribution networks, and wastewater treatment facilities. Water utility stocks are known for their stability, consistent cash flows, and reliable dividend payments.
2. Water Technology and Equipment
Companies in this category develop and manufacture innovative technologies and equipment for water treatment, filtration, purification, and desalination. They play a crucial role in improving water quality and efficiency. Stocks in this sector can offer growth opportunities as new technologies emerge and global water scarcity becomes a pressing issue.
3. Water Infrastructure and Engineering
These companies focus on the construction, maintenance, and upgrading of water infrastructure, including pipelines, reservoirs, dams, and irrigation systems. Their stocks can be influenced by government infrastructure spending, growth in urbanization, and the need for sustainable water management solutions.
The Case For Investing In Water Stocks
Water stocks provide a level of stability in an uncertain market.
The demand for water remains constant, regardless of economic downturns or market volatility. This means that even during challenging times, water companies tend to maintain their value and generate reliable returns.
Looking ahead, investing in water stocks for the next decade can position you for long-term gains. With growing awareness of water sustainability, environmental regulations, and the urgent need for water infrastructure improvements, the water industry is poised for substantial growth.
By investing in the right water stocks, you can ride the wave of this burgeoning sector and reap the rewards.
Let us now look at the 10 best water stocks globally.
10 Best Water Stocks – Globally
| Symbol | M.Cap (Mio $) | PE | Sales (Mio $) | |
| Veolia Environnement | $XPAR:VIE | $22,980 | 29.62 | 340,343 |
| Metso Corp | $FRA:M6Q | $9,334 | 16.68 | 45,458 |
| Alfa Laval | $FRA:AA9 | $15,332 | 29.14 | 41,965 |
| Companhia De Saneamento | $SBS | $8,100 | 14.54 | 31,638 |
| American Water Works | $AWC | $28,644 | 32.48 | 30,342 |
| Geberit AG | $FRA:GBRA | $19,218 | 23.37 | 27,093 |
| Beijing Enterprises Water | $HKSE:00371 | $2,435 | 14.45 | 22,939 |
| Consolidated Water | $CWCO | $310 | 38.61 | 768 |
| York Water | $YORW | $588 | 30.04 | 440 |
| Global Water Resources | $GWRS | $311 | 43.03 | 342 |
France-based Veolia Environment, with the ticker $XPAR:VIE, is the world’s leading global water company, playing a crucial role in the treatment and distribution of water, ensuring access to clean and safe water for millions of people.
It operates water treatment plants, manages distribution networks, and implements advanced technologies for efficient water management.
American Water Works, with the ticker $AWC, has 11x smaller revenues, but the highest valuation in terms of market cap.
Water Stocks And Their Respective Growth
| 3Yr Sales Growth | 3Yr EBITDA Growth | 3Yr Debt Growth | |
| Metso | 13.6 | 9.1 | 8.9 |
| Consolidated Water | 10.4 | -7.3 | 8.7 |
| Veolia Environnement | 9.8 | 6.6 | 21 |
| Companhia De Saneamento | 7 | 3.7 | 12.7 |
| Global Water Resources | 5.2 | 3.5 | -1.1 |
| Geberit | 4.7 | 1.6 | 7.2 |
| Alfa Laval | 4.4 | -2 | 7.1 |
| York Water | 2.7 | 3.2 | 11.3 |
| American Water Works | 1.5 | 4.9 | 9.3 |
| Beijing Enterprises Water | -4.1 | -9.1 | 10.3 |
All water stocks are slow growers, with the fastest one, Mesto, growing at 13.6% on average over the past 3 years.
None of them have higher EBITDA growth compared to revenues, indicating that this space is extremely competitive.
Dividend Yields Of Water Stocks
| Div Frequency | Yield % | |
| Companhia De Saneamento | 1 | 2.27% |
| Consolidated Water Co | 4 | 1.73% |
| Global Water Resources | 12 | 2.32% |
| York Water | 4 | 1.94% |
| Metso | 2 | 2.58% |
| American Water Works | 4 | 1.9% |
| Geberit AG | 1 | 0% |
| Alfa Laval AB | 1 | 1.59% |
| Beijing Enterprises Water | 2 | 8.32% |
| Veolia Environnement | 1 | 3.77% |
Beijing Enterprises Water has the highest dividend yield with 8.32%.
Global Water Resources pays dividends monthly.
Most water stocks pay dividends ranging between 1.5% to 3%.
Risks Of Investing In Water Stocks
Water stocks are capital-intensive and require significant investments to maintain the infrastructure at scale, requiring water companies to constantly re-invest a big part of their profits back into the business.
Another source of big risks comes from the regulatory side. Environmental requirements become ever more demanding, resulting in increased costs, and potential liabilities for contamination events.
All of these risks pose massive challenges for water stocks.
Michael Burry Invests In Water Stocks – Should You?
Check out this excellent video on Pension Craft’s Youtube channel:
Conclusion
Personally, I really like the idea of investing in ‘Water The Megatrend’. But after analyzing the space and seeing how competitive it is, no single stock stands out enough for me to get excited about.
I always liked Veolia, also because I had the chance to work as a supplier for the company when I was still running my marketing service agency in Singapore.
But overall, valuations seem elevated, and I will pass on this sector for now.
📘 Read Also
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- How To Invest In Commodities – 15 Great Stock Ideas
- How To Invest In Battery Metal Stocks – A Simple Guide
FAQ
Which water stocks to invest in?
What water stocks are owned by Michael Burry?
Will water stocks go up?
No one knows and time will tell. Due to the increasing scarcity and global warming, the case can be made that demand will at least remain the same or go up, while the supply will become more challenging to provide. Hence, the price of water should go up, and with it, the business of water stocks would improve, ultimately resulting in the prices of water stocks going up.
Why is water called the new gold?
As global water scarcity becomes more apparent, its scarcity translates into increasing demand and, subsequently, should result in rising water prices. Because of this scarcity, water is often referred to as the new or blue gold.
What is a water stock company?
Put simply, there are three different types of water companies:
1/ Water Utilities – providing water and wastewater services to residential, commercial, and industrial customers.
2/ Water Technology and Equipment Companies – manufacturing innovative technologies and equipment for water treatment, filtration, purification, and desalination.
3/ Water Infrastructure and Engineering – constructing critical water infrastructure, including pipelines, reservoirs, dams, and irrigation systems.
What are the largest water ETFs?
-1- iShares Global Water ETF, with 2,0 Bio AUM, expenses of 0.65% p.a., distributing
-2- Lyxor MSCI Water ESG Filtered ETF, with 1,4 Bio AUM, expenses of 0.60% p.a., distributing
-3- L&G Clean Water ETF, with 0,4 Bio AUM, expenses of 0.49% p.a., accumulating
Personally, I like the L&G Clean Water ETF the best, with the lowest expense ratio.
Age when reaching FI: 40 in 2018
Left the rat race: May 2017
Living in: Singapore
Number of kids: 2
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