Updated on January 24th, 2024 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: York Water Company (YORW)
- Water Stock #6: Essential Utilities (WTRG)
- Water Stock #5: Idex Corporation (IEX)
- Water Stock #4: Gorman-Rupp (GRC)
- Water Stock #3: Lindsay Corporation (LNN)
- Water Stock #2: SJW Group (SJW)
- Water Stock #1: Algonquin Power & Utilities (AQN)
Water Stock #7: York Water Company (YORW)
- 5-year expected annual returns: 8.8%
The York Water Company is a special one in the industry since it is the oldest investor-owned water utility in the United States, having functioned continuously since 1816. The company showcases a unique record of over 200 years of uninterrupted dividend payments to shareholders. It operates entirely within its franchised territory, which covers 51 municipalities within York, Adams, and Franklin Counties, Pennsylvania. The York Water sees an average daily consumption of 21.2 million gallons, generating around $60 million in annual revenues.
On November 3rd, 2023, The York Water Company reported its Q3 results for the period ending September 30th, 2023. For the quarter, revenues came in at $18.8 million, 18.7% higher year-over-year. Increased revenues were primarily due to an increase in rates effective March 1st, 2023, partially offset by a reset to zero of the Distribution System Improvement Charge (DSIC). Growth in the customer base also added to revenues.
Click here to download our most recent Sure Analysis report on YORW (preview of page 1 of 3 shown below):
Water Stock #6: Essential Utilities (WTRG)
- 5-year expected annual returns: 9.1%
Essential Utilities is the second largest publicly traded water utility in the U.S., serving approximately 5.5 million customers across ten states. The $10.1 billion company has raised its dividend for 32 consecutive years, which qualifies it to be a member of the Dividend Champions, and has paid a quarterly dividend for 78 consecutive years.
In early November, Essential Utilities reported (11/6/23) financial results for the third quarter of fiscal 2023. Its revenue dipped -5% over the prior year’s quarter due to lower natural gas prices but the company benefited from rate hikes and customer growth. As a result, its earnings-per-share grew 15%, from $0.26 to $0.30, and exceeded the analysts’ consensus by $0.01. The utility raised its dividend by 7% in the previous quarter.
Click here to download our most recent Sure Analysis report on WTRG (preview of page 1 of 3 shown below):
Water Stock #5: Idex Corporation (IEX)
- 5-year expected annual returns: 9.4%
The IDEX Corporation (IEX) is a company that sells industrial products worldwide. The business operates through three segments: Fluid & Metering Technology (FMT), Health & Science Technologies (HST), and Fire & Safety/Diversified Products (FDSP).
These segments made up 35.5%, 43.5%, and 21.0% of sales, respectively, for 2022. Inside each of the segments, IDEX owns a series of businesses in niche markets that own highly engineered and proprietary assets.
Source: Investor Presentation
These businesses are generally in fragmented niches in growing markets, and most of their businesses are first or second in their niche markets. This gives the business the advantage of being able to drive high returns on operating capital because each of its individual businesses has a moat. IDEX Corporation was incorporated in 1987 and has 8,500 employees.
Click here to download our most recent Sure Analysis report on IEX (preview of page 1 of 3 shown below):
Water Stock #4: Gorman-Rupp (GRC)
- 5-year expected annual returns: 9.6%
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 $655 million and a market capitalization of $813 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.
Gorman-Rupp posted third quarter earnings on October 27th, 2023, and results were largely in line with expectations. Adjusted earnings-per-share came to 25 cents, while revenue rose 8.9% year-over-year to $168 million. The increase in sales was due to an increase in volume, as well as the positive impact of pricing increases put into place last year. Domestic sales rose 10.1%, or $11.7 million, and international sales rose 5.2%, or $2 million.
Click here to download our most recent Sure Analysis report on GRC (preview of page 1 of 3 shown below):
Water Stock #3: Lindsay Corporation (LNN)
- 5-year expected annual returns: 10.1%
Lindsay Corporation provides water management and road infrastructure services in the United States and internationally. The business’s irrigation segment provides irrigation solutions for farmers and contributed 86% of sales in fiscal year 2022, and the infrastructure segment helps with road and bridge repairs and contributed the other 14%.
On October 19th, 2023, Lindsay reported Q4 2023 results for the period ending August 31st, 2023. The business saw diluted earnings-per-share of $1.74, which topped analyst estimates and rose from $1.62 for the same period last year. However, revenues declined 12% year-over-year to $167 million. The revenue decline was due to a sharp drop in irrigation demand as the company was up against a very strong comparable quarter from last year when grain prices were far higher.
Click here to download our most recent Sure Analysis report on Lindsay (preview of page 1 of 3 shown below):
Water Stock #2: SJW Group (SJW)
- 5-year expected annual returns: 12.4%
SJW Group is a water utility company that produces, purchases, stores, purifies and distributes water to consumers and businesses in the Silicon Valley area of California, the area north of San Antonio, Texas, Connecticut, and Maine. SJW Group has a small real estate division that owns and develops properties for residential and warehouse customers in California and Tennessee. The company generates about $630 million in annual revenues.
On October 30th, 2023, SJW Group reported third quarter results for the period ending September 30th, 2023. For the quarter, revenue increased 16.4% to $204.8 million, which was $17.8 million better than expected. Earnings-per-share of $1.13 compared favorably to earnings-per-share of $0.82 in the prior year and was $0.18 above estimates.
Click here to download our most recent Sure Analysis report on SJW (preview of page 1 of 3 shown below):
Water Stock #1: Algonquin Power & Utilities Corp. (AQN)
- 5-year expected annual returns: 12.9%
Algonquin Power & Utilities Corp. is a renewable power and utility company that 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.
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.
For the third quarter, revenue dropped 6% to $624.7 million, adjusted net earnings rose 8% to $79.3 million, and adjusted earnings-per-share (“EPS”) was flat at $0.11. Its adjusted EBITDA, a cash flow proxy, rose 2% to $281.3 million, against Q3 2022.
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 Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 54 stocks with 50+ years of consecutive dividend increases.
- 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 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: