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Water Stocks: The Ultimate Commodity

We all know water is the ultimate commodity, but some investors haven't yet taken advantage of water as the ideal investment opportunity.

Too common to strike your fancy? Don't be fooled by the fact that 70% of the earth's surface is covered in water. That doesn't technically mean we have a lot of it to use...97% of it is saltwater. Only 1% is actually available for human use and consumption.

Meanwhile, increases in agricultural uses and industrialization have led to various water shortages in nations across the globe. We've really been stretching that 1% pretty thin in the last few decades as farmers are planting more crops than ever before and using more and more water due to extreme drought situations...

Worldwide water shortages are quickly impacting industrialization projects as well as the average American family budget. As the laws of supply and demand always state: when something becomes scarce, its value explodes.

Before we discuss the Top Water Stocks to own, we'd like to make it easy and list them out for you. There are many ways to own water stocks, but if you're looking for some top water stocks to purchase, these are your best bet.

Top Water Stocks:

  • American Water (NYSE: AWK)
  • Veolia (OTC: VEOEY)
  • American States Water (NYSE: AWR)
  • Aqua America (NYSE:WTR)
  • General Electric (NYSE: GE)
  • Badger Meter Inc. (NYSE: BMI)
  • Itron Inc. (NYSE: ITRI)

Sometimes it's hard to make up your mind and pick just one stock. If you feel as if that's the case for you then we recommend going with investing in a water index. We have compiled a list of the top water index investments that you may find extremely helpful, and profitable. Our Top Water Index's are:

  • Dow Jones U.S. Water Index
  • Palisades Water Index
  • ISE-B&S Water Index
  • S&P 1500 Water Utilities Index

The more population expands, the more water consumption increases. It's a pretty basic formula with virtually zero variables when it comes to something vital to our survival.

And the increasing price of water stocks over the past few years more explicitly reveals the impact of the water consumption trends on water price trends.

water trends

The amount households pay for water is exponentially increasing faster than U.S. inflation and faster than costs are growing in any other utility sector. Electricity, gas, and telephone charges are lagging far behind this precious resource.

Cable TV and garbage collection costs run more closely to current water costs, but the water prices are still the icing on the cake.

If you think water indexes are your best chance at taking advantage of the opportunity that increasing water prices has presented, then the information below should help you decide which is best for you.

Dow Jones U.S. Water Index: This index encompasses approximately 29 stocks: both national and international companies. The minimum market capitalization of any amongst the group is $150 million...so you know they're doing something right. 

Palisades Water Index: Palisades Indexes LLC have indexes designed for Exchange Traded Funds (ETFs) “and for the structured or derivative product markets.” Their mission statement is presented as follows: "Our aim is to create indexes where there are strong fundamentals and superior performance for investors. One of our specific services is to provide our clients with the knowledge and support of our industry experts. Our capabilities span to providing indexes calculated around the clock in many countries and in any currency for use as a benchmark."

ISE-B&S Water Index: There are over 35 water-related stocks in this index launched in January of 2006. The Index is comprised of companies active in water distribution, water filtration, flow technology, and other almost any other type of water solution.

S&P 1500 Water Utilities Index: A sub-sector of the Standard & Poor's 1500 Utilities Index, this index is composed of just two companies: American States Water (NYSE:AWR) and Aqua America (NYSE: WTR).

If you prefer to avoid investing in indexes and want to stick with stocks from the first list, then you may find the following details extremely helpful in making your decsision.

American Water (NYSE: AWK):, the largest publicly traded water company in the world, not only has its own set of treated water storage facilities, but offers services to both residential and business areas in pipeline repair and upkeep. The company has 49,000 miles of water mains and collection pipes, and offers its repair services to 47 states and customers in Ontario, Canada.As of September 2016, the company had closed 10 acquisitions in six states that brought in more than 1,500 new water customers and about 6,000 new wastewater customers. Another 16 such acquisitions in eight states aims to bring in more than 70,000 customers later in the year.

The company has a great track record investors will love.  All around, American Water is a great company to invest in.

Veolia (OTC: VEOEY): is a French company with businesses in water, environmental services, and energy services and transportation. It has over 1,700 desalination plants in more than 80 countries. Veolia extended its contract with the Milwaukee Metropolitan Swerage District for its ongoing wastewater collection and treatment services. The company's business is to provide clean water to customers and collect wastewater to either be safely discharged or recycled.Veolia uses both biological and membrane technologies to decontaminate water. It has a particular interest in providing and recycling the water used in shale fracking, a water-intensive industry. This contract amounts to $500 million in income for the company. Veolia also offers an annual dividend which stands at $.73 per share.

American States Water (NYSE:AWR): is a California based company that provides services to roughly 260,000 people throughout California. It is one of two companies that is a part of the S&P 500 Water Utilities Index. This particular stock has an excellent dividend history, in lieu of a tough year in 2012. It has been returning value to shareholders through dividend payments since 1931 and has increased dividend payments to shareholders for 60 consecutive years.

Aqua America (NYSE:WTR):This company services 2.8 million residential customers, but it provides water to homes, offices, and industrial customers throughout 14 states. Throughout the past few years of economic hardship, Aqua America noted that there was essentially no decline in the demand for water. The only competition they have includes a couple of other water utility conglomerates – like American Water Works Company (AWK) – and a couple of privately held companies like United Water and Utilities Inc.

General Electric (NYSE: GE)is a U.S. company which also has a large, global stake in water desalination…

It operates the largest desalination plant in Africa: located in Algiers, the Hamma plant supplies the city with 53 million gallons of drinking water per day. GE also powers one of the world's largest desalination plants in Australia and the largest wastewater treatment facility in the world in Abu Dhabi. In April 2015, GE also began installing its own bioreactor membranes into Stockholm's Henriksdal water treatment plant. These membranes are made of a special synthetic resin and undulate to clean the water faster, better, and at a much lower price. GE's reach into several sectors gives it the freedom to expand its different technologies. Even when the company isn't operating its own plants, it is powering and improving upon others. Its steady divident payout of $0.23 per share shows it also has plenty to spare for its supporters.

Badger Meter Inc. (NYSE: BMI) is a U.S. company with a wide reach. It sells mechanical and electronic water meters and products to measure and control goods that travel via pipes. These include water, wastewater, oil, and gas among other things. Badger's meters monitor water usage so customers can be aware of what they're using and what the utilities are charging them for. The utilities use them for billing as well. 75% of the company's meter sales go to municipal water systems. Badger acquired its largest distributor, National Meter and Automation Inc., in October 2014. This provided the company not only with stronger control over its distribution, but services for its customers including meter testing and installation, water audits, and leak detection. In 2016, the company's services were deemed strong enough to be awarded a contract with American Water. As the utility grows its customer base, this company and its devices are reaping the rewards.

Itron Inc. (NYSE: ITRI) offers similar meters for electricity, gas, and water. Its meters also measure use of water for both residential and business use. And, like Badger, the information is available through software, so customers can always be aware of the data being collected. Itron, however, goes a step further in offering data interpretation as a service. First, it has analysis software available to customers which uses the collected data to make short- and long-term predictions about the customer's water use and costs. It also has a subsidiary called Private Cloud which allows businesses to save their usage information and consult with Itron experts to come up with efficiency solutions. Those experts are available for consultations for all customers. Its Professional Services include installation services, system maintenance and training, and technical support.

The bottom line is this: if you have not yet found a place for water in your portfolio, now is the time to make it happen. It's one of the few safe, sound, and secure long term investment options that will guarantee returns in an otherwise volatile marketplace. Today, tomorrow, and 500 years from now: water is and will forever be a hot pick.


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