Water might cover most of our planet, but only 3% of it is freshwater, and climate change is making this precious resource even scarcer. With global warming and rising demand, finding effective water solutions is becoming more critical than ever.
In this landscape, it could be wise to keep an eye on water utility stocks such as Global Water Resources, Inc. (GWRS), California Water Service Group (CWT), and Consolidated Water Co. Ltd. (CWCO), which are consistent dividend payers. These companies are well-positioned to benefit from the increasing focus on water conservation.
Water is more than just a basic necessity; it fuels countless industries, from agriculture and food production to tech and energy. As the world grapples with climate change and water scarcity, the business of sourcing, purifying, and distributing water is becoming increasingly vital.
With the demand for freshwater expected to outstrip supply by 40% by 2030 and the likelihood of more frequent droughts and extreme weather events, the water sector is poised for significant growth. Some experts even suggest that large-scale desalination might be necessary to meet global needs.
This growing need is driving investment in water-related companies, making them attractive options for those looking to capitalize on long-term trends. The U.S. water and wastewater treatment market is projected to hit $206.64 billion by 2032, exhibiting a CAGR of 6.9%.
In addition, the U.S. capital Department of Agriculture (USDA) recently announced a record $2.3 billion in investments under the Western Water framework to support irrigation districts, address drought, and conserve water through innovative water-saving technologies and the production of water-saving commodities.
Considering these factors, let’s look at the fundamentals of the above-mentioned Water stocks, beginning with the third choice.
Stock #3: Consolidated Water Co. Ltd. (CWCO)
Headquartered in Grand Cayman, CWCO designs, constructs, manages, and operates water production, water distribution systems, and water treatment plants, primarily in the Cayman Islands, the Bahamas, and the United States. It operates through four segments: Retail; Bulk; Services; and Manufacturing.
Buoyed by strong financial performance, the company paid its shareholders a dividend of $0.095 per share on July 31 for the third quarter of 2024.
CWCO pays an annual dividend of $0.38, which translates to a yield of 1.34% at the current share price. Its four-year average dividend yield is 2.27%. Moreover, the company’s dividend payouts have increased at CAGRs of 3.8% and 2.3% over the past three and five years, respectively.
In the fiscal first quarter that ended on June 30, 2024, CWCO’s total revenue increased 20.7% year-over-year to $39.69 million. The company reported a gross profit of $13.88 million, indicating a 31.4% growth from the prior year quarter. In addition, its attributable net income came in at $6.47 million, up 66.7% year-over-year, while earnings per share grew 66.7% from the year-ago value to $0.40.
Analysts expect CWCO’s revenue and EPS for the current year to decrease 19.9% and 32.8% year-over-year to $144.35 million and $1.25, respectively. However, for the fiscal year ending December 2025, its revenue is expected to grow 14.4% from the prior year to $165.20 million, while its EPS for the same period is forecasted to increase 16.8% year over year to $1.46.
CWCO shares have surged 45.6% over the past year to close the last trading session at $28.41.
CWCO’s stance is apparent in its POWR Ratings. The stock has a grade B for Momentum and Quality. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 12 stocks in the Water industry, it is ranked #3. Click here to see the additional CWCO ratings (Growth, Value, Stability, and Sentiment).
Stock #2: California Water Service Group (CWT)
CWT provides water utility and related services across California, Washington, New Mexico, Hawaii, and Texas. The company handles the production, purchase, storage, treatment, testing, distribution, and sale of water for domestic, industrial, public, and irrigation purposes, as well as fire protection services.
On July 31, demonstrating its commitment to returning value to shareholders, the company declared the 318th consecutive quarterly dividend of $0.28 per common share. This dividend will be paid on August 23, 2024, to shareholders on record as of August 12, 2024.
With 56 years of consecutive dividend growth, CWT pays an annual dividend of $1.12, which translates to a yield of 2.08% at the current share price. Its four-year average dividend yield is 1.77%. Moreover, its dividend payouts have increased at a CAGR of 6.9% over the past three years.
On July 9, CWT’s largest subsidiary, California Water Service, announced its plans to invest more than $1.6 billion in its districts from 2025-2027, including approximately $1.3 billion of newly proposed capital investments to ensure a reliable supply of high-quality water.
The application to the CPUC also proposes a Low-Use Water Equity Program to decouple revenue from water sales, helping low-water-using, lower-income customers. Additionally, the plan includes replacing aging water pipelines.
On May 28, California Water Service acquired the water system assets of Kings Mountain Park Mutual Water Company. Cal Water's Bear Gulch District, which has been supplying water to Kings Mountain, will now directly serve its customers. This acquisition will allow Cal Water to invest in and maintain Kings Mountain's infrastructure, ensuring safe and reliable water service for daily and emergency needs.
CWT’s operating revenue for the second quarter ended June 30, 2024, increased 25.9% year-over-year to $244.30 million. Its net operating income improved by 202% from the year-ago value to $48.17 million. The company’s net income attributable to CWT grew 324.4% from the prior-year quarter to $40.55 million, while its earnings per share stood at $0.70, up 311.8% year-over-year.
Street expects CWT’s EPS for the third quarter (ending September 2024) to increase 80% year-over-year to $1.08. Its revenue for the ongoing quarter is expected to grow by 20.3% from the prior year to $306.80 million.
Over the past six months, the stock has gained 17.3%, closing the last trading session at $53.88.
CWT’s mixed fundamentals are reflected in its POWR Ratings. It has a B grade for Growth and Sentiment. It is ranked #2 out of 12 stocks within the same industry.
Beyond what is stated above, we’ve also rated CWT for Value, Momentum, Stability, and Quality. Get all CWT ratings here.
Stock #1: Global Water Resources, Inc. (GWRS)
GWRS is a water resource management company that owns, operates, and manages regulated water, wastewater, and recycled water systems, primarily in metropolitan Phoenix and Tucson, Arizona. It aims to implement an integrated strategy called Total Water Management. It serves more than 82,000 people in over 32,000 homes within its 408 square miles of certificated service areas.
On July 31, the company declared a monthly cash dividend of $0.025 per common share, payable on August 30, 2024, to shareholders of record on August 6, 2024. GWRS pays an annual dividend of $0.30, which translates to a yield of 2.35% at the current share price. Its four-year average dividend yield is 2.17%.
On May 7, GWRS agreed to acquire seven water systems from the City of Tucson’s water utility, serving around 2,200 customers in Pima County. These systems will be integrated with existing Global Water utilities in the area, increasing their total customers in Pima County to approximately 7,200. The deal, anticipated to be completed early next year, aligns well with GWRS’ growth and development strategy for Pima County.
For the fiscal first quarter that ended March 31, 2024, GWRS’ total revenues amounted to $11.61 million, while its adjusted EBITDA increased 4.5% year-over-year to $5.40 million. Its adjusted net income for the quarter amounted to $691 thousand, while its adjusted EPS remained flat at $0.03 year-over-year. In addition, the company’s net cash flow from operating activities grew 24.4% from the year-ago value to $8.07 million.
The consensus revenue estimate of $13.60 million for the fiscal second quarter (ended June 2024) represents a 4.6% increase year-over-year. The consensus EPS estimate of $0.08 for the about-to-be-reported quarter indicates a 14.3% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of GWRS have gained 22.2% over the past nine months to close the last trading session at $12.83.
GWRS’ POWR Ratings reflect this outlook. It has an A grade for Sentiment and a B for Stability and Quality. Out of 12 stocks in the same industry, GWRS is ranked first. To see the other ratings of GWRS for Growth, Value, and Momentum, click here.
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CWT shares were trading at $54.30 per share on Friday morning, up $0.42 (+0.78%). Year-to-date, CWT has gained 5.90%, versus a 12.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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