What water stocks are there and how do you buy them?
Hi,
For the purpose of maintaining forum quality, @Jarmoxxx, it would be great if you could tell us more about Tallinn Water and your views on it. A dividend is rarely a good enough reason to buy a stock on its own.
5 Likes
Hey, everyone can read about the company themselves, I just put one example.
1 Like
American States Water could, based on the name at least, fall into this category. I donât know the company, but it has increased its dividend for a whopping 64 consecutive years, which is a long time. Theyâve certainly done things right within that company. This, however, might be reflected in the price; with a market capitalization of $2.77 billion and a net income of $63.8 million in 2018, the P/E is over 40. Then, for example, P/B is 15 and the current effective dividend yield is 1.4%. So the stock might have a small premium due to water (water utility premium), or these are just normal US multiples.
Could it have been âIntelligent Investorâ that talked about these US water stocks, which are natural monopolies? I would guess that this company falls into that category, and this is the reason for such high multiples. So, itâs an extremely defensive stock, whose return at those multiples is probably closer to a government bondâs return. For this reason, one could imagine that the fierce rise in recent years is largely due to the interest rate environment, meaning that safe returns have been sought from such stocks when interest rates are so low. Thus, one could also think that these would be quite sensitive to changes in the interest rate environment. Just speculation, I havenât looked into it more closely. 
1 Like
Iâm not at all familiar with these US water utility stocks, but your intuition sounds logical. What drives such a monopoly position or moats around the business, in general, in addition to 64 years of dividend increases, is that the company generates a relatively high return on equity, 35%. From these factors, one could quickly conclude that competitors have had little access to the companyâs territory and/or the company has been able to expand within its competitive advantages. I could also buy into the view that low interest rates have led investors to seek a safe haven in these types of potentially very defensive, high-quality companies with moats. On top of that, riding the wave of a mega-trend.
1 Like
I found an article from Sijoitustieto (Investment Data) on the subject, written a year ago: Huoltotyö - Production lynxbroker.fi
Itâs a long text and I admit I didnât have time to read it all, but the article generally touches upon the industry and how one can invest in it, introduces different companies, and a bit of everything in between. The writer seems quite knowledgeable about the subject. Companies in the sector can operate in areas such as (water) technology, wastewater management, water treatment, water disinfection or purification, and irrigation systems, so there are all kinds of companies to be found.
I hesitated for a moment whether to bring this thread to the surface, as it is truly a blemish on the forum, but letâs try this one time. Nevertheless, itâs generally an interesting and probably necessary industry, and trends are certainly moving it forward. If this thread doesnât gain momentum now, then it can be locked for all I care; someone can then open a new thread on the topic with a âslightlyâ better opening if they wish. It would be nice to hear from someone more familiar with the industry/companies.
1 Like
I have to agree, this thread is quite bad (!), but water as an investment is undeniably interesting.
I once attended a future seminar organized by my local university, where the then US Ambassador to Finland, Bruce Oreck, spoke. His entire presentation revolved around Finnish nature and especially clean water, claiming it would be Finlandâs greatest competitive advantage in the future. Perhaps the purpose of the presentation was more to emphasize the fact that the biggest and most productive innovations are often simple and already right in front of us â that we donât always need to reinvent the wheel. But Oreck seemed serious about water and the purity of nature when he said that it is Finlandâs most important export product for the future. And as I recall, he wasnât talking about shipping bottled water or ice, but about technology related to clean water and water sufficiency.
Why couldnât this be the case? Cleantech, perhaps a concept somewhat overshadowed by sustainable development, circular economy, and similar ideas, will certainly be a significant area in the future. The problem so far has probably been that those who would most desperately need it have not had the opportunity to invest in it, meaning projects have mainly been implemented through various development aid initiatives and similar channels.
I remember encountering thematic ETFs that invest in clean water and related businesses. I believe OP, among others, even had a fund related to this. I have no idea about their return potential or history, but I would gladly hear more about them. This sector could very well be one where, when the stock market bubble eventually bursts, these become potential investment targets, if they arenât already.
3 Likes
Is this thread about everything from soft drinks to pipe manufacturers, or perhaps water distribution monopolies after all?
2 Likes
This will become a classic on the Inderes forum, letâs wait a couple more years 
2 Likes
Now that Iâve started looking into this a bit more out of interest, my expertise isnât sufficient for investing in individual American companies in this sector. It would turn into a lottery, even though the share price curves are quite stable.
In addition to that expensive fund, OP also offers:
L&G Clean Water UCITS ETF,
iSHARES Global Water UCITS ETF, and
Lyxor World Water (DR) UCITS ETF
Their fees range from 0.49-0.65, which is already a more reasonable figure. These would certainly give some exposure to the sector with lighter due diligence.
6 Likes
Alright, in honor of a rainy Sunday, letâs join the water_stock discussion!
I see this sector as interesting and promising(?) for the future. So:
AS Tallinna Vesi (TVEAT)
Drinking water and wastewater treatment for just under 500,000 residents (Tallinna Vesi | Company â Nasdaq Baltic). Privatized in the early 2000s and listed on the Tallinn stock exchange in 2005 (see previous link). 20M Series A shares and one Series B share (Share - Tallinnavesi)
Course development and key figures (Tallinna Vesi | Reports â Nasdaq Baltic)
Ownership distribution
Q1 and dividend history
Thatâs the company in a nutshell. I, the undersigned, have been eyeing water stocks for some time and have made a small list of interesting companies (e.g., Veolia Environnement SA and Northwest Pipe Company). I would welcome more insights from fellow forum members on water and its future.
6 Likes
Sure, there are plenty of water utilities in the US. However, Iâm not convinced that it would be wise to buy them at current prices. Price tags have totally gotten out of hand during Corona. Of course, the business is defensive and monopolistic, and there seems to be some scalability as well. However, when the core business grows very slowly and you have to pay almost 40 times earnings for it, no thanks. A few percent earnings yield and a one percent dividend doesnât really sound like a margin of safety in this case.
- [American Water Works (AWK)]
- [Aqua America (WTR)]
- [Pentair (PNR)]
- [American States Water (AWR)]
- [Watts Water Technologies (WTS)]
- [Itron (ITRI)]
- [California Water Service Group (CWT)]
- [SJW Group (SJW)]
- [Evoqua Water Technologies (AQUA)]
- [Badger Meter (BMI)]
- [Middlesex Water Co (MSEX)]
- [Connecticut Water Service (CTWS)]
- [York Water Co (YORW)]
- [AquaVenture Holdings (WAAS)]
- [Primo Water (PRMW)]
I found these quite quickly with Google. Of course, a quick glance shows that some of these companies do much more than just water purification and distribution.
4 Likes
I own the iShs Glb Water fund, which invests globally in water companies. Clean water may be scarce in many places in the future.
2 Likes
Letâs revive this legendary thread because weâll be needing water soon! Unfortunately, I donât have any stock ideas to mention at the moment.
A couple of weeks ago, I wrote briefly about the topic in the Lamor thread:
And this week, The Guardian published a proper FUD article, so letâs take a few highlights from it here.
As I wrote earlier, there will potentially be impacts on the following areas:
- Energy (cooling nuclear power plants / hydropower)
- Agriculture
- Clean water
Energy
During last summerâs drought, nuclear power plants had to be powered down because the rivers didnât have enough water flow for cooling, and coal shipments werenât moving because there wasnât enough water for barges.
In Germany, shallow waters on the Rhine are already disrupting barge traffic, forcing boats heading up into central Europe to load at half capacity
In Italy, the Po River is very dry and the adequacy of hydropower is at risk:
âThe problem of drought is serious,â he told Corriere della Sera. âWeâve only had half the average amount of snow. We found ourselves with waterways, lakes and reservoirs in a very critical state, and hydroelectric basins in extreme difficulty.â
Agriculture
At least France and Spain have started to pay attention to irrigation water used in agriculture.
Among the [French] governmentâs plans are modernising agricultural irrigation, which represents up to 80% of consumption in summer, boosting wastewater recycling, and reducing loss due to leakage.
All of Spain has been in drought since January 2022, but water supplies in Catalonia have fallen so low that authorities this week introduced laws including a 40% reduction in water used for agriculture, a 15% reduction for industrial uses, and a cut in the average daily supply per inhabitant from 250 litres to 230 litres.
Clean water
As seen from the quotes above, the situation in Western and Southern Europe is already becoming serious due to the prolonged drought.
https://twitter.com/Hydrology_IRPI/status/1633192460712017924
For this reason, water reserves are depleting, and at the same time, significant amounts of clean water are being wasted due to poor infrastructure. For example, Reuters wrote last year that in parts of Italy, pipes leak so badly that up to 42% of the water goes to waste!
Our pipes lose on average 42% of the water they carry.
5 Likes
This is indeed a strange paradox. Often, it is precisely in regions suffering from drought and a lack of clean water that water is wasted because of poor infrastructure and water-intensive agriculture.
Then there is Finland, the land of a thousand lakes, where a pipe leak in a small village was one of the most followed news stories of the summer for an entire month.
9 Likes
Over the weekend, I did some reading on the subject, and it seems that major investments are now underway in Italy as well. However, I havenât managed to find information on which entities are carrying out this work.
More information via the link (hopefully, it leads to the correct search results).
https://www.italiadomani.gov.it/content/sogei-ng/it/en/Interventi/investimenti/ricerca-avanzata.html?orderby=%40jcr%3Ascore&sort=desc&resultsOffset=0&fulltext=water
Additionally, it appears that the drought in Europe eased slightly last week.
https://twitter.com/Hydrology_IRPI/status/1635196946028855296
2 Likes
In the meantime, here is one idea Iâve been reading about:
Veolia Environnement, because it is French and seems to operate in todayâs hot sectors: energy efficiency for buildings, as well as water distribution and related technologies.
I mentioned the French aspect because Macron gave a speech a couple of weeks ago where he said:
The nation needs to do regarding water as has been done in the field of energy, a form of sobriety plan. That is to say that we must all â citizens, industrialists, services, local authorities, farmers â pay attention to this resource which is becoming rare. This is what I said at the end of the summer, it is the end of abundance,
About 40% of Veoliaâs revenue comes from water. A large part of that is municipal water distribution, where France and Spain account for a significant portion.
As you can see from the image heading, volume is an important factor in the water business. So, if France (and also drought-stricken Spain) starts paying attention to water consumption => volume drops, and along with it, revenue drops.
Water technology on its own would be interesting, but I think Iâll pass on Veolia as a whole.
1 Like
I personally hold that iShs Glb Water ETF; it pays a small dividend and is up +37.5%.
1 Like