As we stand on the precipice of a global water crisis, savvy investors are eyeing companies poised to capitalize on the challenge of poor water infrastructure — a challenge that, if left unaddressed, could devastate economies and communities alike. In this landscape, water stocks emerge as flag-bearers of opportunity, promising immense wealth creation in the next decade.
The Strength of Essential Utilities (WTRG)
Essential Utilities (NYSE: WTRG) stands out as a beacon of stability in the tumultuous waters of the stock market. Despite recent volatility, Essential Utilities boasts an appealing forward P/E ratio of 18.8 and a healthy dividend yield of 3.29%. The company’s vast infrastructure network spans 14,450 miles of water main, 200 wastewater treatment plants, and 1,000 water storage tanks, making it a stalwart presence in the U.S. utilities sector.
With a targeted investment of $7.2 billion earmarked for infrastructure enhancements between 2024 and 2028, Essential Utilities is positioning itself for steady growth. Moreover, having raised dividends in 32 of the last 33 years, the company demonstrates a commitment to value creation that should resonate well with long-term investors.
American Water Works Company (AWK): Navigating the Waters of Growth
American Water Works Company (NYSE: AWK) mirrors Essential Utilities’ trajectory, treading a steady path amidst market fluctuations. Boasting 53,700 miles of pipe, 620 water treatment plants, and 175 wastewater treatment plants, American Water is a dominant force in the industry with a regulated customer count of 3.5 million.
The company’s ambitious investment plans of $16 to $17 billion scheduled between 2024 and 2028 signal a commitment to growth through strategic acquisitions and infrastructure improvements. With a focus on military installations and a targeted 7% to 9% annual growth in earnings per share, American Water is charting a course for sustained success and potential dividend growth.
Primo Water Corporation (PRMW): Riding the Wave of Innovation
During the past 12 months, Primo Water Corporation (NYSE: PRMW) has surged by an impressive 74%, hinting at the stock’s substantial potential. With a forward P/E ratio of 23.6, PRMW appears attractively valued for investors seeking exposure to the water industry’s growth.
Primo Water’s merger with BlueTriton is a strategic move that is set to transform the landscape of healthy hydration offerings. Anticipating revenue and adjusted EBITDA of $6.5 billion and $1.5 billion respectively for the last twelve months, this merger is primed to unlock synergies worth $200 million and position the combined entity strongly for growth. With an LTM free cash flow of $565 million, the merged entity will have ample financial flexibility for expansion and deleveraging.
Primo Water’s merger shines as a beacon of opportunity, hinting that the best is yet to come for PRMW stock as it navigates the dynamic currents of the evolving water market.
