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Clean Water Investing

By John Eade
President Argus Research

Many investors are beginning to focus their investment funds on companies that follow sustainable business practices and/or are addressing global impact issues. At Argus, we are a portfolio advisor to a Unit Investment Trust that is built around ESG (environmental, social and corporate governance) criteria, and we are also launching a separately managed account based on ESG and Impact investing principles. Two times a year, we screen our Universe of Coverage to highlight the stocks that score highest on ESG criteria.

We note that Impact Investing is addresses issues such as climate change, hunger, poverty, shelter and clean water. Clean water is not only a personal issue; many industries, including oil, gas, semiconductors, chemicals, electric utilities, food products, beverages and metals and mining, are heavily reliant on clean water. According to the 2030 Water Resources Group, by 2030, “demand for water will be 40 percent higher than it is today, and more than 50 percent higher in the most rapidly developing countries. Historic rates of supply expansion and efficiency improvement will close only a fraction of this gap. Unless local, national and global communities come together and dramatically improve the way we envision and manage water, there will be many more hungry villages and degraded environments – and economic development itself will be put at risk in many countries.” Indeed, South Africa’s Cape Town currently is threatened with a “Day Zero,” in which the city of 4 million will be forced to turn off the taps and residents will have to line up at collection sites for their daily ration.

The companies in our list are working on systems and providing products to reduce global and domestic water risks.

American Water Works (AWK: BUY): Founded in 1886, American Water Works is the largest publicly traded U.S. water and wastewater utility company. Its properties consist of transmission, distribution and collection pipes; water and wastewater treatment plants; pumping wells; storage tanks; and other facilities and equipment. The current yield on the shares is 2.1%.

Aqua America (WTR: BUY): Aqua America is a publicly traded water and wastewater utility holding company with operating subsidiaries serving approximately three million people. The company has a solid business model, a history of steady earnings growth, and a growing dividend. We think the company will continue to provide shareholders with solid risk-adjusted returns as it stands to benefit from expected investment of more than $700 billion in the nation's water and wastewater infrastructure recommended by the EPA over the next two decades. The current yield on the WTR shares is 2.5%.

Itron (ITRI: HOLD): Itron is a technology provider serving the global energy and water industries. Nearly 8,000 customers in more than 100 countries use the company's technology – meters and software – to optimize their delivery and use of energy and water. • Danaher (DHR: BUY): Danaher’s Environmental and Supplies Solutions business segment includes a Water Quality business that provides water monitoring and disposal services to municipalities and businesses. Danaher recently boosted its dividend by 14%.

Ecolab (ECL: BUY): Ecolab is a provider of water, hygiene, and energy technology and services. The company delivers comprehensive solutions to promote safe food, maintain clean environments, optimize water and energy use, and improve operational efficiency for customers in the food, healthcare, energy, hospitality, and industrial sectors. Ecolab has paid a cash dividend for 80 consecutive years. In December, the board increased the quarterly dividend by 11% to $0.41, or $1.64 annually. The current yield is 1.3%.

Roper Technologies (ROP: BUY): Roper designs and develops software and engineered products for a range of industrial end markets, including healthcare, transportation, food and energy. Its Industrial Technology segment produces water pumps and water meter-reading products and systems. The company recently raised its dividend by 18%.

Editor’s Note: For more information on these companies, please see the Argus Research Analyst Reports at www.argusresearch.com.

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