Water will always be one of the most valuable resources on earth and will continue to be in high demand, as every living creature needs it to survive. In light of COVID-19, one thing is certain. Americans and consumers alike never really change their water consumption habits (aside from global catastrophes related to the weather).
Globally, the annual consumption of fresh water is around 4 trillion cubic meters, which makes water utility services a lucrative industry for investors. The global water and wastewater market are expected to reach around $704 billion by 2027, owing to the rising demand for freshwater in domestic use, agriculture, and industrialization. Just like those who buy penny stocks, investors in water stock companies are the major beneficiaries of this positive surge in the utility industry.
Top 10 Best Water Stocks in 2020
If you’re contemplating ways to leverage the economic potentials of this ever-rising industry, here are the 10 best water stocks in 2020.
York Water Corporation
The York Water Company (YORW) is one of the most consistent water stocks that have rewarded their customers for the longest period. For more than 200 years, shareholders have been enjoying regular payouts from the company. In January from 2020, YORW paid 18.02 cents per share dividend to its shareholders, being their 2019 fourth-quarter dividend. The payout was a 4% increase from the previous rate. YORW presently boasts of 1.63% annual dividend yield and is projected to be 4.9% in the next five years, according to a Wall Street report. Its 2019 return rate was 46.4% and also predicted to have a 309% 10-year return. Its mode of operation and wide service coverage makes it one of the most reputable companies with solid standing. YORW provides utility services that include water and drainage services to almost 50 municipalities in Pennsylvania. As of 2018, its average daily availability was 35.4 million gallons, and average daily consumption was estimated at 19.5 million gallons.
Middlesex Water or MSEX stock has been experiencing a positive uptrend in the past one year. According to Gov Capital Investor Blog, as of February 29, the price was $60.140%. Its future price was predicted to have risen to $100.920 after a year – meaning 25.779% growth. With just a hundred dollar worth of stock today, you stand a high chance of having $125.779 from the investment just one year down the line. Looking at long-term projection, by 2025, the least possible price and the best possible price would be $302.0135 and $408.6065 respectively. Currently, the company's market cap is $1.1 billion, and it also yielded a 1.6% dividend in 2019. Its 10-year return rate is expected to be 410%.
Consolidated Water Co Inc (CWCO)
The current payout ratio of CWCO is 0.77%, which is higher than 51% of the over 350 companies in the regulated utility industry. Presently, its share price is $16.16, and the dividend yield is 2.10%. CWCO's market cap is $242.85 million. The company builds, designs, finances and operates water production systems for its clients in Cayman Island.
American States Water Company (AWR)
AWR serves over 1 million people and has 261,000 customer connections in more than 80 communities in Southern, Northern, and Coastal California. The over 90-years old company was established in 1929 and operates in different utility services that include water services and electricity distribution. The company ended the year 2019 with an encouraging gain of 29%. This stock remains highly favored by shareholders because of its consistency for over a decade now. In the past five years, it has been up to 150%. AWR has a $3.2 billion market value, 1.4% dividend yield and a five-year projection of 6%. Its 2019 annual return was 31.8% and estimated to have a 545% 10-year return.
California Water Service Group (CWT)
California Water Service Group is the third-largest in the U.S. water utility industry. The company serves around 2 million people in 100 communities in California, Hawaii, and New Mexico. It has consistently kept its stock up 112% for more than five years and currently has a 53.46% payout ratio. CWT boasts of a $2.5 billion market value, 1.5% dividend yield and five-year projection yield growth of 9.8%. Its 2019 annual return was 9.2%, and the 10-year return rate predicted to be 265%. This makes it count among the best performing water stocks to invest in.
American Water Works Co. Inc. (AWK)
In 2019, this stock was up 35%, showing a 4% hike from its 2018 performance. Tipped as one of the best-performing stocks, AWK stock has been up 134% over the past five years. The company provides water and wastewater services for several communities in 30 states in the United States and some parts of Canada. It presently serves 15 million people. Only a very few NYSE listed companies come close to AWK in terms of performance and rewards to shareholders. Its current market value is 21.9 billion, having an annual dividend yield of 1.5%. The company’s payout ratio is 36.05% and has a five-year projection growth of 8.2% and a 597 10-year return.
Aqua America, Inc.
Aqua America Inc. shareholders have been enjoying 12 years of consecutive dividend growth. By March 1, 2020, it will pay out an annual dividend yield of $0.94 per share, totaling 66.67% of its earnings. Its current dividend yield is 2.19%, which equals 3-year average growth of 5.77%. Aqua American was up 32% in 2019. Its customers cut across 13 U.S. states, serving 3 million people. Investors have enjoyed around a 72% increase from the company in the past five years. WTR’s present market capitalization is $9.9 billion and is estimated to have a 333% 10-year return.
Artesian Resources ARTNA
The Artesian Resources market cap is valued at $348 million and predicted to have a 205% 10-year return. The company is the biggest and oldest regulated water utility on the Delaware Peninsula. It has been providing water services to millions of residents in Maryland, Delaware, and Pennsylvania since 1905. On January 10, 2020, the company announced its quarterly dividend of $0.2496, which was received by shareholders on February 21, 2020. It boasts of 2.70059% dividend yield and a 23.37% payout ratio.
Formerly known as SJW Corp, SJW Group stock has a very profitable outlook. Currently, its quote is equal to $60.485 and expected to reach $98.732 in the next five years. This makes it a good option for a long-term plan. With $100 investment today, you can realize up to $163.23 in 2025. The company boasts of $2.0 billion market value, 1.7% annual dividend yield, and projected to have a 10-year return of 314%. It provides different utility services in both Water Utility and Real estate industries.
First Trust ISE Water Index (FIW)
Since its inception in May 2007, FIW has been rewarding its shareholders. Currently, the company has assets worth $578 under its management. FIW provides a somewhat unique service, tracking a modified market capitalization-weighted index known as ISE Clean Edge Water Index. Its expense ratio is 0.55% and has an annual dividend yield of 0.53%. It is a multi-cap exchange-traded fund (ETF) focusing on companies operating in the potable and wastewater industry. It has many holdings under its management, which include Essential Utilities, Inc., Aqua America Inc., and Agilent Technologies Inc.
How to Invest in Water Stocks Today
It doesn’t matter if you are buying water stocks or looking for the best penny stocks in the market; consideration and knowledge is everything. You must commit to due diligence.
While the water stock market offers ample opportunities, your buying decision can make or mar your investment performance. When shopping for the right stock, the very first step is to research and choose the company whose mode of operations best suits your needs, budget, and preference.
In your research, you should pay attention to the regulatory environment and financial reports. These two factors largely determine the performance of any stock. For instance, any changes in the existing regulations in the industry can significantly impact the market, either positively or the other way round
Financial reports will also give an insight into the current standing of a company to guide your investment decision. However, in most cases, the market reactions sparked by the reports only have short-term effects. A particular stock may be down today as a result of negative market reactions and eventually bounce back within a month. You will, therefore, need to balance your judgment between the short-term market response and the stock’s historical behavior and fundamentals.
Is Investing in Water Stock a Good Idea?
According to the United Nations 2018 World Water Development Report, by 2050, almost 6 billion people are likely to reside in places that suffer water shortage for at least one month a year. Presently, an average American uses 80 to 100 gallons of water per day. By 2027, private spending in the U.S. municipal water infrastructure is expected to reach 11%, and private spending on drinking water infrastructure forecasted to be $60 billion. And by 2025, annual spending on wastewater will be over $10 billion.
All these realities put the water utility industry in a firm position in the stock market. Investors are always on the lookout for markets that can provide a haven even when other stocks aren't doing so well. Water stocks tick all the boxes in the investors’ checklist as it can conveniently be harnessed for both long-term and short-term financial plans. Although they appear unnoticed amidst headlining companies right now like in the COVID-19 vaccine space, many smart investors are making money with penny stocks and water stocks.
In 2019, the water stock market outperformed many other investment portfolios and was more favorable to shareholders. With most of the top industry players ending the last year on a high note, 2020 promises to be a more fulfilling year for investors. If you invest in water stocks today, you will look back a year to this time and be glad you made the decision.