13 Best Water Stocks in 2022: How To Invest in Water

The Infrastructure Act authorized $55 billion to improve America’s water infrastructure. If you worry about climate change and water scarcity, consider investing in water stocks. Here is a shortlist to get you started.

Ben Carson   Updated January 19th, 2022

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Should you invest in water?

Warmer weather and population growth are creating water shortages from California to South Africa. According to the WHO 2019 report, three out of ten people globally don’t have access to safe drinking water. And, according to the 2020 Water Climate Report, up to 40% of the world’s population will lack water by 2050 unless major infrastructure investments are made. At the same time, up to $40 billion of clean water is lost each year due to factors like antiquated infrastructure.

The Infrastructure Law will deliver $55 billion to the Environmental Protection Agency (EPA) to improve drinking water and wastewater infrastructure. The funds will be made available over five years. This is good news for water infrastructure stocks.

The best water stocks 

You can invest in companies that help reduce water scarcity and improve water infrastructure while delivering a positive impact. And owning water stocks can protect your portfolio from water shortage risks that your other investments may face.

However, a lot of so-called water companies are not pure-play. Popular water fund holdings like Danaher Corp (DHR), a healthcare-industrial conglomerate, and Roper Technologies (ROP) sell water technologies, but most of their sales don’t come from water.

Still, there are many water stocks you can invest in; they include water utilities that distribute water, water treatment companies, the makers of pumps, valves, and filters, and testing and monitoring companies.

Utilities, in particular, are attractive to conservative investors. Publicly-traded water utilities:

Moreover, the water and water treatment markets in the U.S. are very fragmented and open to consolidation by larger utilities, which could be an attractive opportunity to investors.

Water stock list

  • American Water Works (AWK)
  • Essential Utilities (WTRG)
  • California Water Service Group (CWT)
  • American States Water Co (AWR)
  • SJW Group (SJW)
  • York Water (YORW)
  • Xylem (XYL)
  • Pentair Plc (PNR)
  • Evoqua Water Technologies (AQUA)
  • Ecolab Inc (ECL)
  • Tetra Tech, Inc (TTEK)
  • Itron Inc (ITR)
  • A.O. Smith Corp (AOS)

Read more about each company:

1. American Water Works (AWK)

  • Market capitalization: $29 billion
  • 1-year return: 2%

The most popular water stock, American Water Works is a regulated water and water treatment utility. American Water provides drinking water and wastewater services to around 14 million people in 25 U.S. states.

Going forward, American Water sees an opportunity to consolidate the water and wastewater space through acquisitions. Besides, the company plans to invest between $28 and $32 billion in water infrastructure renewal, resiliency, and quality over the next decade. American Water has almost $4 billion in revenues and $29 billion in market cap. It also pays an attractive dividend; the current dividend yield is 1.5%.

As an Environmental, Social, and Governance (ESG) investment, the stock is also attractive to sustainable investors.

2. Essential Utilities (WTRG)

  • Market capitalization: $12.3 billion
  • 1-year return: 4%

Bryn Mawr, Pennsylvania-based Essential Utilities (WTRG) provides drinking water and wastewater services. The company also owns a smaller natural gas distribution business. The second-largest publicly traded water utility in the U.S., WTRG serves around 5 million customers in 10 states under the Aqua and Peoples brands. WTRG has nearly $1.5 billion in revenue, a strong balance sheet, and an attractive dividend yield of 2.2%.

3. California Water Service Group (CWT)

  • Market capitalization: $3.3 billion
  • 1-year return: 14%

California Water Service is one of the largest publicly traded water utilities in the U.S. The company provides drinking water and wastewater to more than 2 million people in California, New Mexico, Hawaii, and Washington. The $3 billion market cap utility has almost $800 million in annual revenue and a dividend with a 1.5% yield.

4.  American States Water Co (AWR)

  • Market capitalization: $3.4 billion
  • 1-year return: 13%

California-based AWR provides water and electricity to over 1 million people in nine states. Its water subsidiary, Golden State Water Company, serves 262,000 customer connections in California. The company reported almost $500 million in annual revenue, and the stock offers a 1.6% dividend yield.

5. SJW Group (SJW)

  • Market capitalization: $2 billion
  • 1-year return: 2%

SJW Group, originally the San Jose Water Company, is a Californian water utility primarily serving customers in San Jose. SJW distributes water to around 1 million customers. The company reported $564 million in 2020 sales, has $2 billion in market cap, and boasts a 2% dividend yield.

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6. York Water (YORW)

  • Market capitalization: $589 million
  • 1-year return: -2%

A Pennsylvania water utility, York Water is the smallest publicly listed water utility on the list. The $600 million market cap company supplies water to over 71,000 customers in York, Adams, and Franklin Counties in Pennsylvania. The company has paid dividends since 1816, currently offering a yield of 1.8%.

7. Xylem (XYL)

  • Market capitalization: $19.8 billion
  • 1-year return: 5%

Rye Brook, New York-based Xylem is a water technology company that makes valves, pipes, pumps, smart meters, and water treatment and testing equipment. Founded in 2011, Xylem has $5.35 billion in revenue with an attractive 17.5% EBITDA margin. The company sells its products to water utilities, industrial, residential, and commercial customers across the world.

An ESG stock, Xylem has committed to reducing carbon emissions to zero and even issued a $1 billion green bond to fund its capital spending.

8. Pentair Plc (PNR)

  • Market capitalization: $11 billion
  • 1-year return: 13%

Pentair is a water treatment company that makes filtration products, as well as pumps and valves. The company has $3 billion in sales and serves customers in 150 countries. Pentair should be one of the beneficiaries of the Infrastructure Act, which allocated $55 billion to solving water infrastructure and treatment issues in the U.S.

9. Evoqua Water Technologies (AQUA)

  • Market capitalization: $4.6 billion
  • 1-year return: 22%

Headquartered in Pittsburgh, Pennsylvania, Evoqua makes water and wastewater treatment systems like filters. The company sells its products to over 38,000 customers, such as municipalities and industrial customers.

Importantly, Evoqua sells solutions to remove PFAS, hazardous chemicals, from water. The Environmental Protection Agency has just launched a plan to address the contamination of water supply with PFAS.

Evoqua has nearly $1.5 billion in annual revenue, $251 million in EBITDA, and $4.5 billion in market cap. An ESG stock, AQUA was named one of Global Corporate Knights’ 2022 100 Most Sustainable Companies in the World.

10. Ecolab Inc (ECL)

  • Market capitalization: $61 billion
  • 1-year return: 0%

Based in St. Paul, Minnesota, Ecolab makes water treatment and purification equipment for customers in the food, hospitality, healthcare, and industrial markets in over 170 countries. The company has $12 billion in sales and targets a long-term sales growth of 6-8% and earnings growth of 15%.

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11. Tetra Tech, Inc (TTEK)

  • Market capitalization: $7.7 billion
  • 1-year return: 6%

A Californian consulting and engineering services firm, Tetra Tech helps customers with big water infrastructure projects. The company has $3.2 billion in annual revenues (plus a $3.5 billion backlog) and works on 70,000 consulting projects each year. Tetra Tech earns around 40% of revenues from U.S. federal, state, and local governments, and should therefore benefit from the Infrastructure Act as well as global initiatives to reduce the impact of climate change.

12. Itron Inc (ITR)

  • Market capitalization: $2.7 billion
  • 1-year return: -38%

Itron makes smart meters that measure and manage water, electricity, and gas. The Spokane, Washington-based company sells its products to utilities and cities in over 200 countries. Itron earned $2.2 billion in 2020 revenues, largely from North American customers. And they ended 3Q 2021 with a $3.4 billion backlog. Going forward, Itron’s water measurement and management solution benefit from water scarcity.

13. A.O. Smith Corp (AOS)

  • Market capitalization: $12.8 billion
  • 1-year return: 40%

A.O. Smith makes residential and commercial water heaters and boilers and sells water treatment products in the U.S., India, and China. Around three-quarters of revenues come from the U.S., where AOS is the market leader in both residential and commercial water heater markets. The company’s water treatment business has grown at a 37% annual rate over the past decade, and AOS sees a $2.6 billion addressable market in the U.S. alone. The Milwaukee, Wisconsin-based business delivers $2.9 billion in annual sales.

Water ETFs

If you don’t want to pick stocks, you can invest in thematic water funds like the Invesco Water Resources ETF (PHO). Check out our list of the top water funds.

🔔 Looking for more options? Check out the list of the best water desalination stocks to buy.

NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.

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