With inflation imposing hardships on American households and devaluing the dollar, the natural instinct is to turn to precious metals like gold and silver. However, there’s an even more critical resource that deserves your attention. And with that, we should dive into the best water stocks to buy.
Yes, water does seem mundane considering that most of the world is covered with it. However, according to the Bureau of Reclamation, only about half of a percent of the earth’s water is fresh water. That leaves very little room for poor usage or stewardship of this precious resource. So, by logical deduction, the underlying ecosystem represents one of the most vital economic sectors.
To be fair, many if not most ideas in the space are rather boring utility plays. However, even that can be an advantage. With more than one risk-on sector experiencing corrective pressures, sometimes boring is the way to go. With that, below are the best water stocks to consider.
American Water Works (AWK)
Falling under the utilities sector, American Water Works (NYSE:AWK) through its subsidiaries provides water and wastewater services. Per its public profile, the New Jersey-based enterprise offers its services to approximately 3.5 million active customers. It covers a range of needs, from residential to commercial to various professional specialties.
Financially, it must be said that it’s not the most exciting idea out there. However, aside from a miss in the first quarter of this year, American Water has been fairly consistent. In the past four quarters, its average earnings per share reached roughly $1.23. Further, the average earnings surprise during this period came out to 2.85%.
During the trailing 12 months (TTM), American Water posted net income of $959 million or earnings of $4.93 per share. Revenue landed at $4.31 billion. For fiscal 2024, covering experts anticipate EPS to expand by 6.7% to $5.23. On the top line, sales could see a lift of 5.9% to $4.48 billion.
Lastly, AWK offers a forward dividend yield of 2.37%. That makes it one of the dependable names among the best water stocks.
Essential Utilities (WTRG)
Based in Bryn Mawr, Pennsylvania, Essential Utilities (NYSE:WTRG) also operates within the regulated water utilities space. Per its corporate profile, Essential provides water, wastewater and natural gas services in the U.S. In terms of coverage, the company serves about 5.5 million residential, commercial industrial and governmental customers. Notably, it has a history going back to the late 19th century.
Again, if you’re looking for fireworks in Essential’s financials, you’re not going to get it. However, outside of a Q4 miss, it’s been consistent. During the past four quarters, the company posted an average EPS of 52.5 cents. This performance translated to an average earnings surprise of 6.85%.
During the TTM period, Essential posted net income of $572.56 million or earnings of $2.11 per share. Revenue in the cycle hit $1.94 billion. For fiscal 2024, analysts believe that EPS may rise 11.3% to reach $2.07. On the top line. Sales could enjoy a 7.7% gain to land at $2.21 billion.
Enticingly, Essential offers a forward yield of 3.29%. That makes it one of the best water stocks available.
Consolidated Water (CWCO)
Operating out of the Cayman Islands, Consolidated Water (NASDAQ:CWCO), like the other best water stocks falls under the utilities space. With its subsidiaries, Consolidated designs, constructs, manages and operates water production and water treatment plants. It mainly serves its home market. However, it also covers the Bahamas and the U.S. It’s also a specialist in the field of reverse osmosis desalination equipment.
The latter innovation – which converts salt water into potable (drinking) water – could be a gamechanger, particularly if tied to other advancements such as small modular reactors. Still, it must be said that CWCO stock is one of the riskiest ideas in the water business. Shares are down almost 25% despite generating an earnings surprise of 48.15%.
Seemingly, Consolidated can’t get any respect. In the TTM period, net income reached $33.52 million on sales of $187.03 million. Unfortunately, analysts anticipate a big erosion in earnings and sales for fiscal 2024; hence the volatility. However, fiscal 2025 could see the beginning of a recovery.
Again, it’s more of a gamble. However, under the right circumstances, CWCO can fly.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.