Updated on April 26th, 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: A.O. Smith (AOS)
- Water Stock #6: Artesian Resources Corp. (ARTNA)
- Water Stock #5: Roper Technologies (ROP)
- Water Stock #4: Gorman-Rupp Co. (GRC)
- Water Stock #3: Consolidated Water Co. (CWCO)
- Water Stock #2: Stantec Inc. (STN)
- Water Stock #1: Pentair plc (PNR)
Water Stock #7: A.O. Smith (AOS)
- 5-year expected annual returns: 8.1%
A.O. Smith is a leading manufacturer of residential and commercial water heaters, boilers and water treatment products. A.O. Smith generates the majority of its sales in North America, with the remainder from the rest of the world. It has category-leading brands across its various geographic markets.
Source: Investor Presentation
The company is perhaps best-known for its water heaters. A.O. Smith has raised its dividend for 27 years in a row, including an ~8% increase in October 2021.
Over the long-term, we believe that A.O. Smith can grow its EPS by 6% per year. With a 1.7% dividend yield and annual dividend increases, A.O. Smith is an appealing stock for dividend growth investors.
We expect 8.1% annual returns through 2027.
Click here to download our most recent Sure Analysis report on A.O. Smith (preview of page 1 of 3 shown below):
Water Stock #6: Artesian Resources Corp. (ARTNA)
- 5-year expected annual returns: 8.1%
Artesian Resources Corp. was founded in 1905 in New Castle County, Delaware. Through its subsidiaries, the company provides water, wastewater and other services, primarily in the Delaware region. Artesian Resources sells and distributes water to residential, commercial, industrial, governmental, and utility customers throughout the state.
In addition, Artesian Resources provides water for public and private fire protection in Delaware, Maryland, and Pennsylvania. The company produces 7.9 billion gallons of water annually through 1,311 miles of water main with a population of approximately 301,000 served.
On March 10th, 2022, Artesian Resources reported Q4 and FY 2021 results. Water sales revenue grew 1.8% to $18.6 million mainly due to a rise in non-residential consumption revenue. Other utility operating revenue and non-utility operating revenue also increased year-over-year by 12.7% and 16.4%, respectively. That said, Q4 operating revenue increased by 3.8% to $22.6 million year-over-year.
For the full year 2021, the company invested $40.8 million in water and wastewater infrastructure. Moreover, Artesian Resources has acquired, in January 2022, Tidewater Environmental Services, Inc., a Middlesex Water Company’s wholly-owned subsidiary, bringing the number of wastewater customers served in Delaware more than doubled.
Click here to download our most recent Sure Analysis report on ARTNA (preview of page 1 of 3 shown below):
Water Stock #5: Roper Technologies (ROP)
- 5-year expected annual returns: 9.4%
Roper Technologies is a specialized industrial company that manufactures products such as medical and scientific
imaging equipment, pumps, and material analysis equipment. Roper Technologies also develops software solutions for the healthcare, transportation, food, energy, and water industries. The company was founded in 1981, generates
around $5.5 billion in annual revenues, and is based in Sarasota, Florida.
On November 10th, 2021, Roper hiked its quarterly dividend for the 29th consecutive year by 10.2% to $0.62. On February 2nd, 2022, Roper reported its Q4-2021 results for the period ending December 31st, 2021. Quarterly revenues and adjusted EPS were $1.51 billion and $3.73, indicating a year-over-year increase of 13% and 14%, respectively.
Source: Investor Presentation
The company wrapped up FY-2021 on a great note. Its businesses delivered 9% organic growth enabled by Roper’s ongoing commitment to innovation, continued migration to its recurring revenue SaaS solutions, and an
improving macro recovery.
Click here to download our most recent Sure Analysis report on ROP (preview of page 1 of 3 shown below):
Water Stock #4: Gorman-Rupp Co. (GRC)
- 5-year expected annual returns: 9.8%
Gorman-Rupp began manufacturing pumps and pumping systems back in 1933. Since that time, it has grown into an
industry leader with annual sales of about $405 million. Today, Gorman-Rupp 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 49 years.
Gorman-Rupp released fourth quarter and full-year earnings on February 4th, 2022, and results missed expectations on both the top and bottom lines. Earnings-per-share came to 25 cents, which was eight cents down from estimates.
Revenue was up 14% year-over-year to $94.2 million but missed estimates by over $4 million.
Click here to download our most recent Sure Analysis report on GRC (preview of page 1 of 3 shown below):
Water Stock #3: Consolidated Water Co. (CWCO)
- 5-year expected annual returns: 10.2%
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 $158.2 million market capitalization. It serves a wide variety of international customers.
Consolidated Water reported full year 2021 results on 03/29/22. Bulk revenue increased 10.2% to $26.8 million from $24.3 million in the year-ago period. Services revenue increased 7.3% to $13.9 million from $12.9 million in the year-ago period.
That said, total revenue for the full year 2021 stood at $66.9 million, down 7.9% year-over-year due to the increases in the bulk segment and services segment. Net income from continuing operations attributable to company stockholders stood at $3.4 million, down from $8.6 million year-over-year.
Click here to download our most recent Sure Analysis report on CWCO (preview of page 1 of 3 shown below):
Water Stock #2: Stantec Inc. (STN)
- 5-year expected annual returns: 10.4%
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.
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 February 23rd, 2022, Stantec released its Q4 results for the period ending December 31st, 2021. Quarterly net
revenues came in at $720.7 million, 8.7% higher on a constant basis year-over-year, driven by organic net revenue and acquisition net revenue growth of 2.0% and 6.7%, respectively. Net income increased by 11.4% to $13.1 million, or $0.15/share. This resulted from gross margin growth, lower net interest, and lower non-cash net lease asset, related property, and equipment impairments. Specifically, gross margins grew by 250 basis points to 55.3%.
The company’s contract backlog increased to a record $4.01 billion, 17.3% higher year-to-date, including double-digit growth in the Energy & Resources and Environmental Services backlog.
Click here to download our most recent Sure Analysis report on STN (preview of page 1 of 3 shown below):
Water Stock #1: Pentair plc (PNR)
- 5-year expected annual returns: 14.2%
Pentair operates as a pure–play water solutions company with 3 segments: Aquatic Systems, Filtration Solutions, and Flow Technologies. Pentair was founded in 1966. Pentair has increased its dividend for more than four decades in a row, when adjusted for spin–offs.
Pentair reported its fourth quarter earnings results on February 1. Revenue of $990 million increased 24% year-over-year. Core sales, which excludes the impact of currency rate movements, acquisitions, and dispossessions, were up 19% year over year. Pentair recorded earnings–per–share of $0.87 for the fourth quarter, which was up by 24% year over year.
The company also performed well in the first quarter of fiscal 2022. You can see a snapshot of the company’s fiscal first-quarter results in the image below:
Source: Investor Presentation
Total returns are expected to reach 14.2% over the next five years.
Click here to download our most recent Sure Analysis report on Pentair (preview of page 1 of 3 shown below):
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.
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.
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 38 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.