Jump On Into Water Utilities For Water Price Exposure And A Dividend That Keeps On Dripping

by: Zvi Bar

These days many investors are seeking out commodity linked investments and stable businesses and dividend paying equities. There are several investment options that may meet all of these criteria, but one that is often overlooked is water.

Water is essential for all life on Earth. Water covers the majority of the planet, but most of it is undrinkable because it is seawater, or freshwater that has been somehow tainted by pollutants or a biological hazard. Of the water that is potable, a good deal of it frozen in glaciers, or in some other way inconveniently located.

As the world population increases, the need for drinkable water will also increase. Nonetheless, we are already at a stage where short-term water shortages are possible even in first world nations. Some less fortunate regions are consistently suffering from water shortages, and the situation will only be complicated by future population growth and related development.

As water scarcity becomes a greater issue, the price for it will only increase. Water is not only essential for humans to survive, but it is as essential to the growth of agriculture as is fertilizer, soil, or any other component to the process. If water prices do begin to increase dramatically, it should bode will for those companies that are in the regulated business of distributing water, or water utilities.

Water utilities not only provide exposure to water and the ever-growing demand for it, but most water utilities also provide a dividend that will provide some income while an investor waits for the equity to appreciate.

Below are the recent performance rates for seven American water utility stocks that pay a dividend of at least three percent. I have provided their present yields as well as their 2012-to-date, 3-month, 6-month and 1-year equity performance rates.

Most water utilities have not run up recently, or even over the last few years. Most of these water utilities are also between ten percent above or below where they were trading five years ago. They have, at least, provided about double the yield of the S&P 500 during this time-frame.

Here in the United States, we are not immune from water problems. Many regions regularly suffer from seasonal droughts and water shortages. In particular, the Southwestern United States underwent significant urban development and population growth over the last two decades, and many areas in the region are not particularly water-rich to start.

Other concerns could present themselves there and elsewhere, including potential future contamination of the water supply. Should such issues arise, investors will likely be happy they jumped on into water utilities.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.