The water looked like “urine” and smelled like “a sewer”…
Those are the words of Ashley Holt, a Flint, Michigan resident who was describing the third-world conditions of the water coming out of her faucet. While that is disgusting enough on its surface, the most serious issues were lying beneath.
Lead had leached into the municipal water supply, subjecting those who drank and bathed in the water to a dizzying array of serious health conditions.
Anyone exposed to Flint water supply could have unknowingly risked neurological damage, seizures, comas, and even death. The damage lead does to the developing brains of children is even more harrowing. Because of this contaminated water, a generation of children from the area could be stricken with mental retardation, low attention spans, learning disabilities, and even an elevated risk of committing violent crimes.
To put in perspective just how nasty this water was, a General Motors plant stopped using the water entirely because it began corroding car parts.
It just goes to show you how incredibly important it is to have clean water. Simply put, it is essential to human survival.
But investing-wise, water is also essential to a recession-proof portfolio. I love stocks for companies that are completely necessary to survival and immune to the stock market whiplash like we’ve seen so far this year. Like discount retailers, pest control companies, and “sin stocks”, water companies are always going to have customers in good times and bad. In other words, people will pay their water bill before making other, less-necessary purchases.
Since we’re staring at what could be a year of serious stock market volatility, I wanted to share three of the best ways to protect your portfolio while still reaping safe, solid returns… and cashing some serious dividend checks along the way.
It’s no secret that American infrastructure is in terrible shape, as evidenced in the Flint tragedy. This is especially true of the 1.5 million miles of pipes beneath America’s soil, some of which are over 100 years old!
Some estimates put the cost of simply maintaining the current pipes at $1.5 trillion in the next 25 years. But visible and politically-charged incidents like what happened in Flint should make those investments expand, especially if new environmental standards are put in place to quell public anger and keep these types of accidents from ever happening again.
In short, that all leads to big business for private water companies…
American Water Works Company (NYSE: AWK) is the largest publicly traded water and wastewater utility company in the country. It is also a no-brainer stock for anyone interested in a low-risk, steady growth investment.
But before you start writing off a utility stock for producing tepid returns that slowly drip into your portfolio, just take a look at AWK over the past five years:
That’s an impressive 144% gain on a “boring” utility stock, and I’m not even counting the dividend payouts.
It’s already up almost 9% this year while the DOW is down 6%.
It can attribute much of that success to its acquisitions strategy. Thanks to its massive size, we can expect that American Water Works will keep purchasing smaller utilities and buying up troubled water supply networks to continue to grow and expand its operations. Marry that with the crumbling infrastructure I previously mentioned, and you have plenty of room for growth for the next decade or two.
It also pays a respectable 2.1% dividend, which is crucial to reap gains during these stock market downturns.
The company also just announced that it would join in the efforts to help those affected in Flint, pledging a $50,000 Disaster Relief Grant to the Flint Child Health & Development Fund.
SJW Corp. (NYSE: SJW) operates in all things water: production, purchase, storage, purification, distribution, wholesale, and retail sale.
It is a far smaller company than American Water Works — sporting a $661 million market cap to AWK’s $11.64 billion. But it has thrived in the areas that it operates in. It serves around a million people in San Jose, California (hence the name of the company) along with another 36,000 folks in several counties in Texas.
While it hasn’t provided the outsized returns of the much larger American Water Works, there is something that I like better about SJW: its robust dividend history…
It is one of my beloved “dividend aristocrats” — meaning that it has grown its dividend each and every year for at least 25 years. It is one of my most reliable strategies for identifying strong companies; the ability to raise your dividend consistently for that long takes a smart, well run operation.
SJW has been able to raise that dividend for 48 years running. It just raised it yet again last week, and it’s currently yielding around 2.5%
Like AWK, SJW has crushed the market so far this year, returning almost 10%.
Now, while both SJW and American Water Works are both, ahem, solid investments, I’ve saved my favorite water stock for last…
My favorite water company combines what I like best about the ones I just mentioned: it is heavy on acquisitions and has a very long history of dividend increases. That means you’ll see serious growth in both the stock price and the dividend yield. Last year, it made a whopping 16 new acquisitions — making it the fastest-growing water company on this list.
It has also boosted its dividend each and every year for over two decades.
But the real reason I value this company over the others I mentioned is it is one of the very few that will actually pay you to invest in it. You heard that right…
This utility offers a secret plan that actually lets you buy the stock at a 5% discount.
And while it cannot legally advertise this plan to the public, I can. I’ve put together a report that explains everything.
