Following Wednesday’s rain/hail/thunder storm that took the Big Apple by surprise, Business Insider posted a grotesque YouTube video of a subway grate burping up sludge and cigarette butts on the feet of commuters. It was disturbing, but as anyone paying attention to weather patterns can tell you, thus is likely the new normal.
Weather patters are wacky all over these days, and unusual drought in some areas are just as common as unusual flooding in another.
Drought
I’ve argued before that the increased water risk in affluent areas puts more pressure on water infrastructure to provide modern solutions. Simply put, developed nations tend to have more money and motivation than their undeveloped peers to kick things into gear. And with 60.84% of the country’s land area in a state of moderate to severe drought as of July 10, up from 55.96% the previous week, it’s hard to say when these demands will be less vocal.
Firms that provide water treatment chemicals, pumps, valves, pipes, filtration, desalination, distribution and irrigation systems and bottled water, among other services all have the opportunity to benefit in this area. (Some big names in these fields are listed here)
Floods
Flooding is just as worrisome. Like droughts they destroy crops, lessen water quality, and put enormous strain on water infrastructure. They also cause architectural damage and devastate ecosystems.
So when New York City’s subway systems start spewing sludge onto straphangers and forcing them to wade through feet of water to catch a train, New Yorkers should be thanking their lucky stars the storm was as short lived as it was. They should also be asking, what is the city going to do about it?
It’s the same question the city asked last summer when Hurricane Irene decided to head East instead of demolishing the Financial District and causing untold billions in damage.
It could have been much worse, and we wonder what has been done to prevent these worse case scenarios from becoming a reality. Is it not time for all cities to take action? As mentioned above, the increasing cry for modern systems in affluent areas is only going to get louder.
Business Section: Investing Ideas
Maintaining water quality and supply is an undeniable problem faced around the globe. So who benefits in providing solutions? For an investor the options are quite limitless.
There are small grassroots approaches, like Tennant Company (TNC), which manufactures floor scrubbers that kills bacteria with electrodes and without harmful chemicals cleaners. That means no harmful substances are flushed down drains, relieving pressure on water utilities. Could a company with this type of niche explode if laws react to the problem?
Then there are the big-boy players. Firms like Pall Corp. (PLL) create filtration and purification system solutions. Northwest Pipe Co. (NWPX) specializes in large-diameter, high-pressure steel pipeline systems for use in water infrastructure applications. Gorman-Rupp Co. (GRC) designs and sells pumps and related fluid control products. Flowserve Corp. (FLS) sells precision engineered flow control equipment. Tetra Tech Inc. (TTEK) provides consulting and engineering for big development projects and is involved in all kind of water treatments and cleanups. The list goes on.
Desalination, which turns salt water into fresh drinking water, is also an important contributor to managing water supply and quality. But it’s a bit harder to find pure plays on that score. General Electric (GE) is a good example of this, as desalination is only one of their many projects and revenue streams. Some other names include Consolidated Water Co. Ltd. (CWCO), Energy Recovery, Inc. (ERII), and Exterran Holdings, Inc. (EXH).
US Water Utilities
You can also attack the problem regionally with water utilities trading on U.S. markets (listed below). Nearly every stock in this industry is currently rallying above their 20, 50, and 200-day moving averages, a notable feat. The majority of these names offer handsome dividends and will also be reporting earnings in early August. Do you think they have some positive surprises to report?
The growth potential of this industry is a realizable trend. In February it was reported that since 2001 the water sector has beaten the S&P 500 by 11% annually. In addition to the names mentioned above, can these water utility stocks help to continue this streak?
1. Artesian Resources Corp. (ARTNA, Earnings, Analysts, Financials): Provides water, wastewater, and engineering services on the Delmarva Peninsula. Market cap at $183M, most recent closing price at $21.19. Dividend yield at 3.74%. Payout ratio at 69.74%. The stock is currently trading -0.55% below its 20-day MA, 4.98% above its 50-day MA, and 12.24% above its 200-day MA. Earnings date: 08/07/12.
2. American Water Works Company, Inc. (AWK, Earnings, Analysts, Financials): Provides water and wastewater services to residential, commercial, industrial, public, and other customers in the United States and Canada. Market cap at $6.33B, most recent closing price at $36.04. Dividend yield at 2.78%. Payout ratio at 63.88%. The stock is currently trading 4.27% above its 20-day MA, 5.82% above its 50-day MA, and 11.34% above its 200-day MA. Earnings date: 07/30/12.
3. American States Water Company (AWR, Earnings, Analysts, Financials): Provides water, electric, and contracted services in the United States. Market cap at $763.64M, most recent closing price at $40.71. Dividend yield at 2.77%. Payout ratio at 46.95%. The stock is currently trading 1.91% above its 20-day MA, 6.49% above its 50-day MA, and 13.03% above its 200-day MA. Earnings date: 08/06/12.
4. Connecticut Water Service Inc. (CTWS, Earnings, Analysts, Financials): Operates as a regulated water company in Connecticut. Market cap at $269.9M, most recent closing price at $31.06. Dividend yield at 3.1%. Payout ratio at 75.78%. The stock is currently trading 4.31% above its 20-day MA, 7.85% above its 50-day MA, and 10.79% above its 200-day MA. Earnings date: 08/06/12
5. Consolidated Water Co. Ltd. (CWCO, Earnings, Analysts, Financials): Develops and operates seawater desalination plants and water distribution systems. Market cap at $122.33M, most recent closing price at $8.06. Dividend yield at 3.58%. Payout ratio at 67.69%. The stock is currently trading -2.67% below its 20-day MA, 4% above its 50-day MA, and 1.24% above its 200-day MA. Earnings date: 08/06/12.
6. California Water Service Group (CWT, Earnings, Analysts, Financials): Provides water utility and other related services in California, Washington, New Mexico, and Hawaii. Market cap at $787.91M, most recent closing price at $18.69. Dividend yield at 3.35%. Payout ratio at 71.73%. The stock is currently trading 0.91% above its 20-day MA, 3.92% above its 50-day MA, and 4.21% above its 200-day MA. Earnings date: 08/06/12.
7. Middlesex Water Co. (MSEX, Earnings, Analysts, Financials): Operates regulated water utility and wastewater systems in New Jersey, Delaware, and Pennsylvania. Market cap at $299.43M, most recent closing price at $19.08. Dividend yield at 3.88%. Payout ratio at 92.74%. The stock is currently trading 0.87% above its 20-day MA, 2.85% above its 50-day MA, and 4.66% above its 200-day MA. Earnings date: 08/09/12.
8. Pure Cycle Corp. (PCYO, Earnings, Analysts, Financials): A vertically integrated water and wastewater service provider, engages in the design, construction, operation, and maintenance of water and wastewater systems in the Denver metropolitan area. Market cap at $53.13M, most recent closing price at $2.19. No dividend. The stock is currently trading 3.24% above its 20-day MA, -0.22% below its 50-day MA, and 1.01% above its 200-day MA. Earnings date: 07/09/12.
9. SJW Corp. (SJW, Earnings, Analysts, Financials): Engages in the production, purchase, storage, purification, distribution, wholesale, and retail sale of water. Market cap at $449.67M, most recent closing price at $24.20. Dividend yield at 2.94%. Payout ratio at 60.67%. The stock is currently trading 0.65% above its 20-day MA, 2.33% above its 50-day MA, and 2.72% above its 200-day MA. Earnings date: 07/25/12.
10. Aqua America Inc. (WTR, Earnings, Analysts, Financials): Operates regulated utilities that provide water or wastewater services in the United States. Market cap at $3.67B, most recent closing price at $26.44. Dividend yield at 2.5%. Payout ratio at 62.54%. The stock is currently trading 3.78% above its 20-day MA, 9.78% above its 50-day MA, and 19.32% above its 200-day MA. Earnings date: 07/31/12.
11. York Water Co. (YORW, Earnings, Analysts, Financials): Engages in impounding, purifying, and distributing drinking water in Pennsylvania. Market cap at $232.61M, most recent closing price at $18.35. Dividend yield at 2.95%. Payout ratio at 76.01%. The stock is currently trading 2.55% above its 20-day MA, 5.28% above its 50-day MA, and 6.67% above its 200-day MA. Earnings date: 08/08/12.
Use the Compar-O-Matic to see changes in the monthly return over the past two years for the stocks listed above. Go to Kapitall to access more free tools and data:
Written by Rebecca Lipman
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Artesian Resources Corp. (ARTNA, Chart, Download SEC Filings)
- American Water Works Company, Inc. (AWK, Chart, Download SEC Filings)
- American States Water Company (AWR, Chart, Download SEC Filings)
- Connecticut Water Service Inc. (CTWS, Chart, Download SEC Filings)
- Consolidated Water Co. Ltd. (CWCO, Chart, Download SEC Filings)
- California Water Service Group (CWT, Chart, Download SEC Filings)
- Middlesex Water Co. (MSEX, Chart, Download SEC Filings)
- Pure Cycle Corp. (PCYO, Chart, Download SEC Filings)
- SJW Corp. (SJW, Chart, Download SEC Filings)
- Aqua America Inc. (WTR, Chart, Download SEC Filings)
- York Water Co. (YORW, Chart, Download SEC Filings)
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