Updated on January 11th, 2022 by Bob Ciura
Water is one of the basic necessities of human life. Life as we know it cannot exist without water. For this simple reason, water may be the most valuable commodity on Earth.
It is only natural for investors to consider purchasing water stocks. There are many different companies that can give investors exposure to the water business, such as water utilities. Some other companies are engaged in water purification.
In all, we have compiled a list of over 50 stocks that are in the business of water. The list was derived from five of the top water industry exchange-traded funds:
- Invesco Water Resources ETF (PHO)
- Invesco S&P Global Water ETF (CGW)
- Invesco Global Water ETF (PIO)
- First Trust ISE Water Index Fund (FIW)
- Ecofin Global Water ESG Fund (EBLU)
You can download a spreadsheet with all 56 water stocks (along with metrics that matter like price-to-earnings ratios and dividend yields) by clicking on the link below:
In addition to the Excel spreadsheet above, this article covers our top 7 water stocks today, that we cover in the Sure Analysis Research Database.
This article will discuss the top 7 water stocks according to their expected returns over the next five years, ranked in order of lowest to highest.
Table of Contents
- Water Stock #7: Gorman-Rupp Company (GRC)
- Water Stock #6: Danaher Corporation (DHR)
- Water Stock #5: Consolidated Water Co. (CWCO)
- Water Stock #4: Stantec Inc. (STN)
- Water Stock #3: Pentair plc (PNR)
- Water Stock #2: Mueller Industries (MLI)
- Water Stock #1: Algonquin Power & Utilities (AQN)
Water Stock #7: Gorman-Rupp Company (GRC)
- 5-year expected annual returns: 7.3%
Gorman-Rupp is an industry leader with annual sales of about $500 million. It is a focused, niche manufacturer of critical systems that many industrial clients rely upon for their own success. GormanRupp generates about one-third of its total revenue from outside of the U.S.
The company also has one of the most impressive dividend increase streaks in the market, which currently stands at 50 years. That makes Gorman-Rupp a member of the prestigious Dividend Kings.
Gorman-Rupp reported third quarter earnings on October 28th, 2022, and results were mixed. The company missed estimates with adjusted earnings-per-share of 25 cents. That was 11 cents light against estimates. Revenue was $154 million, which was $12 million better than expectations. That was also a $52 million increase year-over-year. The vast majority of the increase was due to the May 2022 Fill-Rite acquisition.
Adjusted EBITDA was up 56% to $22.5 million, up from $14.4 million a year ago. The company’s backlog increased fractionally to $267 million from the year-ago period.
Click here to download our most recent Sure Analysis report on Gorman-Rupp (preview of page 1 of 3 shown below):
Water Stock #6: Danaher Corporation (DHR)
- 5-year expected annual returns: 7.4%
Danaher Corporation designs, manufactures and markets professional, medical, industrial, and commercial products and services. The company operates through three main segments: Life Sciences (52% of annual revenue – end of 2021), Diagnostics (32% of annual revenue), and Environmental & Applied Solutions (16% of annual revenue).
The company made 14 acquisitions in 2021 for a total of $11.0 billion, including the Aldevron acquisition of $9.6 billion.
Source: Investor Presentation
On October 20th, 2022, Danaher Corporation released its Q3 fiscal 2022 results for the period ending September 30th, 2022. For the quarter the company reported revenue of $7.66 billion which represents a 6.0% increase compared with revenue of $7.22 billion in the same quarter of 2021.
Revenue from the Life Sciences segment totaled $3.776 billion, rising 4.0% year-over-year. Revenue from the Diagnostics segment grossed $2.679 billion, increasing 9.5% year-over-year. Revenue from the Environmental & Applied Solutions segment totaled $1.208 billion, up 5.0% year-over-year. Reported earnings per diluted share equaled $2.56 compared to $2.39 in the prior year, an increase of 7.0%.
For the full year of 2022, the company expects that core revenue growth will be in the high-single-digit percent range.
Click here to download our most recent Sure Analysis report on Danaher (preview of page 1 of 3 shown below):
Water Stock #5: Consolidated Water Co. (CWCO)
- 5-year expected annual returns: 9.7%
Consolidated Water was founded in 1973 as a private water utility in Grand Cayman. The company uses a desalination process that helps provide water where naturally potable water is scarce or does not exist. Consolidated Water has since grown to a $224.6 million market capitalization. It serves a wide variety of international customers.
Consolidated Water reported third quarter results on 11/14/22. Total revenue increased 53% to $25.1 million. Retail revenue increased 20% to $6.3 million. Bulk revenue increased 26% to $8.7 million. Services revenue increased 172% to $8.7 million.
Net income from continuing operations attributable to company stockholders was $824,000 or $0.05 per share and the company paid a quarterly cash dividend of $0.085 per share ($0.34 on an annualized basis), totaling $1.2 million in dividends in the third quarter of 2022.
As of September 30, 2022, cash and cash equivalents totaled $51.1 million, up $2.0 million from $49.1 million as of June 30, 2022, with working capital at $71.1 million, debt of only $0.2 million, and stockholders’ equity totaling $158.8 million.
Click here to download our most recent Sure Analysis report on CWCO (preview of page 1 of 3 shown below):
Water Stock #4: Stantec Inc. (STN)
- 5-year expected annual returns: 9.9%
Stantec Inc. provides professional consulting services in the field of infrastructure and facilities internationally. This includes services in engineering, architecture, interior design, environmental sciences, project management, and project economics.
The company also undertakes water provision, transportation, and public works such as transportation planning and traffic engineering.
Source: Investor Presentation
Finally, it serves the urban regeneration, infrastructure, education, and waste industries. Stantec generates around $3.6 billion in annual revenues and is based in Edmonton, Canada.
On October 18th, 2022, Mueller Industries reported Q3 2022 results for the period ending September 24th, 2022. The business saw diluted earnings-per-share of $2.74, which beat analysts’ estimates by 39 cents. Net sales decreased 3.8% year-over-year to $944.8 million due to the absence of the businesses the company divested in 2021, and reduced copper prices.
Year-over-year sales growth of 22% from the value-added businesses couldn’t keep up with copper prices averaging 19% lower than they were last year, and copper tube and brass rod volumes declining 14% year-over-year. The business remains in a strong financial position with zero net debt and strong cash generation.
Click here to download our most recent Sure Analysis report on STN (preview of page 1 of 3 shown below):
Water Stock #3: Pentair plc (PNR)
- 5-year expected annual returns: 10.8%
Pentair operates as a pure–play water solutions company with 3 segments: Aquatic Systems, Filtration Solutions, and Flow Technologies. Pentair was founded in 1966 and has increased its dividend for more than four decades in a row, when adjusted for spin–offs.
Source: Investor Presentation
Pentair reported its third quarter earnings results on October 25. Revenues of $1.06 billion grew 9% year-over-year, and beat estimates slightly. Core sales, which excludes the impact of currency rate movements, acquisitions, and divestments, grew 4% year over year.
Pentair recorded earnings-per-share of $0.99 for the third quarter, up by 11% year over year. Pentair’s earnings-per-share beat the analyst consensus by $0.06. Pentair updated its guidance for the current year during the earnings report. For fiscal 2022, Pentair is now forecasting earnings-per-share of around $3.65, which indicates solid earnings-per-share growth of around 10%.
Click here to download our most recent Sure Analysis report on Pentair (preview of page 1 of 3 shown below):
Water Stock #2: Mueller Industries (MLI)
- 5-year expected annual returns: 17.2%
Mueller Industries manufactures and sells metal and plastic products around the world through its 3 segments: Piping Systems, Industrial Metals, and Climate.
The Piping Systems segment offers copper tubes, and plumbing-related fittings and it also resells steel pipes, brass, and other metal products to wholesalers in a variety of industries.
Source: Investor Presentation
The Industrial Metals segment manufactures brass, bronze, and copper alloy rods and other metal products for OEMs in the industrial, construction, HVAC, plumbing, and refrigeration markets.
The Climate segment offers valves, protection devices, and brass fittings for various OEMs in the commercial HVAC and refrigeration markets, high-pressure components, and accessories for the air-conditioning and refrigeration markets
According to management, most of Mueller’s businesses remain at capacity, and the business is seeing healthy backlogs. The business is in a strong financial position with zero net debt and strong cash generation.
Click here to download our most recent Sure Analysis report on MLI (preview of page 1 of 3 shown below):
Water Stock #1: Algonquin Power & Utilities Corp. (AQN)
- 5-year expected annual returns: 21.2%
Algonquin Power & Utilities Corp. trades on both the Toronto Stock Exchange and New York Stock Exchange under the ticker, AQN. The renewable power and utility company was founded in 1988. The company has increased its dividend every year since 2011.
It has two business segments: regulated utilities (natural gas, electric, and water) and non-regulated renewable energy (wind, solar, hydro, and thermal). Combined, its entire portfolio has 4.3 GW of generating capacity that it aims to achieve 75% renewable energy generation by 2023.
Source: Investor Presentation
Algonquin serves more than 1 million connections primarily in the U.S. and Canada. It also has renewable and clean energy facilities that are largely (about 82%) under long-term contracts of ~12 years with inflation escalations.
Algonquin reported its Q3 2022 results on 11/11/22. For the quarter, revenue rose 26% to $666.7 million, adjusted net earnings fell 25% to $73.5 million, adjusted earnings-per-share (“EPS”) fell 27% to $0.11, but adjusted EBITDA, a cash flow proxy, increased by 10% to $276.1 million, against Q3 2021.
Management noted that the quarterly results were impacted by higher interest rates and delays in the construction and completion of certain renewable projects due to the timing of tax incentives.
The pending Kentucky Power acquisition would add to the rate base of its regulated utilities fleet with an expected close in the second half of 2022. In October, AQN announced that it was performing capital recycling on four wind projects that would raise cash proceeds of $278 million and C$107 million. AQN reduced its 2022 EPS estimate to $0.66-$0.69.
Click here to download our most recent Sure Analysis report on AQN (preview of page 1 of 3 shown below):
Final Thoughts
Water could be one of the biggest investing themes over the next several decades. An increasing global population is only going to cause demand for water to rise in the future.
And, given the fact that water is a necessity of human life, demand for water should hold up extremely well, even during the worst recessions.
Therefore, young investors with a longer time horizon such as Millennials should consider water stocks.
These factors make water stocks appealing for risk-averse investors looking for stability from their stock investments.
Not all the water stocks on this list receive buy recommendations at this time, as some appear to be overvalued today. But all the water stocks on this list pay dividends and are likely to increase their dividends for many years in the future.
Additional Resources
At Sure Dividend, we often advocate for investing in companies with a high probability of increasing their dividends each and every year.
If that strategy appeals to you, it may be useful to browse through the following databases of dividend growth stocks:
- The Dividend Aristocrats List: S&P 500 stocks with 25+ years of dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 48 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
The major domestic stock market indices are another solid resource for finding investment ideas. Sure Dividend compiles the following stock market databases and updates them monthly: