Top Performing Water Stocks

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Water is an essential resource that people need to survive. The need for water creates a constant level of demand for the resource. The predictable demand results in stable dividends from water companies. Some of these utility companies also appreciate over time while providing a lower-risk opportunity than other sectors.

Quick Look at the Top Performing Water Stocks:

Deep Dive

Investors looking for promising water stocks may want to consider these.

1. Essential Utilities Inc. (NYSE: WTRG)

Essential Utilities shares have been down for the past year, but the water utility company looks more reasonable at its current price point. The company provides water for residential, commercial and industrial needs. It also has wastewater and natural gas customers.

2. York Water Co. (NASDAQ: YORW)

York Water is a microcap company with a market cap of a little below $600 million. The investor-owned utility was founded in 1816 and has the longest record of consecutive dividends since 1816. The company impounds, purifies and distributes water. The company serves people in 54 municipalities in south-central Pennsylvania. The company has roughly 75,000 service water and wastewater connections.

3. American Water Works Company Inc. (NYSE: AWK)

American Water Works is the largest water company in the United States. The company provides drinking water and wastewater services to over 14 million people in 14 states and 18 military installations.

4. Middlesex Water Co. (NASDAQ: MSEX)

Middlesex Water is a water utility company that has been around since 1897. The company addresses residential, commercial and municipal water and wastewater needs.

5. Global Water Resources Inc. (NASDAQ: GWRS)

Global Water Resources is a pure-play water resources company that owns and manages water utilities located near Phoenix, Arizona.

6. Ecolab Inc. (NYSE: ECL)

Ecolab is a water technology company that delivers solutions to purify and cleanse water. In a presentation to investors, Ecolab stated that it expects to maintain strengthening performance despite a challenging macro environment. Resilience during economic uncertainty can help this stock be more resilient than stocks in other sectors during recessions.

7. Xylem Inc. (NYSE: XYL)

The American water technology provider specializes in residential, commercial, agricultural and industrial water. The company also serves government agencies. Xylem expanded its market share through the recent acquisition of Evoqua through an all-stock transaction valued at $7.5 billion. 

Pros

Water stocks are known for reliable earnings and dividends. You can earn steady cash flow from these stocks and reinvest them into more shares. Some of these stocks have been paying dividends for over 100 years and have survived various economic cycles. The world needs water utilities, and water stocks allow investors to benefit from this permanent need.

Where to Buy

You can invest in many types of water stocks. Investors can choose from individual stocks or ETFs. However, the broker you choose is also important. Picking the right broker will give you more choices and lower fees. These are some of the top brokers to consider if you want to invest in water stocks.

How to Choose

Ready to dive into water stocks? While these assets can help with portfolio diversification, you should consider the following factors before getting started.

Companies Financial Performance

Investors should look at a company’s revenue and net income growth. These numbers help gauge a company’s sustainability and ability to gain market share. Looking at guidance for the year can help investors know what to anticipate moving forward.

Regulatory Environment

Regulations can impact a utility company’s costs which get passed to consumers. These policies can also influence a utility company's capacity to operate in an area. Water companies must receive approval before they can build new plants. A more difficult regulatory process can slow down project development. However, loose regulation can result in dangerous construction. Regulations within the industry can impact stock prices.

Geographical Diversification

Most water stocks have their resources concentrated within a few states. These stocks heavily depend on that state or city’s ability to keep residents and achieve population growth. Population declines in a major city can hurt a water utility company that has most of its resources near that city. Water companies with resources spread throughout the United States and different parts of the world are more protected from a few areas experiencing population declines.

Water Industry's Fundamental Drivers and Trends

The water industry has several driving forces, such as population growth, infrastructure, and technological trends. If you invest in these stocks, you should monitor the water industry and look for updates. Companies may mention these trends in their earnings calls and in press releases. 

Frequently Asked Questions

Best Water Stocks Methodology

The best water stocks methodology involved selecting profitable water stocks with a good history of paying dividends. The list includes a mix of microcap and large-cap companies.