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Invest in water stocks
Is it worth tapping into water stocks? Or will they put you in deep water?
Water is one of the most important resources that we have on earth. It’s used in food production, for recreational purposes and for drinking. At least 70% of the global population has access to a safely managed drinking water service. 90% of the population have access to at least a basic service. As a basic human right, everyone is entitled to sufficient, affordable, safe water for drinking, cooking and personal hygiene. Each state can decide how to fulfill these obligations.
Unlike other utilities, you can’t choose to change your water supplier to try and save money on your household bills. This means that there’s regulation in place to ensure that customers get fair prices on their water bills.
Here are some water companies that you can invest in, and some information on how to invest in water stocks.
What are water stocks?
Water stocks are the shares of companies that supply water. We have 25 water companies supplying water to England, Scotland and Wales, but most are privately owned. These companies make your water safe to drink — the quality is regulated by the Drinking Water Inspectorate in England and Wales, who tests for bacteria, chemicals and metals. It also tests water pressure.
How to invest in water stocks
- Choose stocks to invest in. You can check out some water stocks above and find out more about them.
- Choose an investment platform. You’ll need one that lets you invest in the stock exchange that your chosen stocks are listed on.
- Sign up and fund your account. You might need to wait for your account to be verified and for your funds to hit the account before you can begin.
- Find your chosen stock. You can search its name or ticker.
- Review and buy. It’s as easy as that!
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UK water stocks
There are three main water stocks in the UK.
Severn Trent provides water and waste services to more than 4.5 million homes and businesses in the Midlands. Its name derives from the two rivers that it operates within: the Severn and the Trent. It vows that it’s going to have the lowest water bills in England and Wales until 2025. You can visit its reservoir sites for a walk or cycle, too.
United Utilities is the latest water company in the UK. It provides water and waste services in the North West of England to more than 7 million homes. It owns 166 supply reservoirs, river and stream intakes, lake abstractions and groundwater sources to supply water.
Pennon Group is a British water utility company. It makes more than 80% of its profits from its subsidiary, South West Water. It also owns Thames Waste Management, Skipaway Holdings and Shore Recycling. The company is part of the FTSE250.
Investing in global water stocks from the UK
Not all countries worldwide operate their water companies in the same way as we do in the UK. For example, American Water Works provides water in 46 US states to more than 14 million homes.
American Water Works
American Water Works is a public utility company. It operates in the US and Canada. It provides water in 46 states through most of its divisions It also has subsidiaries that manage drinking water and wastewater systems. The company established the American Water Military Services Group which gives supply to military bases in the US.
Essential Utilities, which was previously known as “Aqua America” is a water utility company in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Indiana and Virginia. It’s a component of the S&P 4000. In the 20 years between 1993 and 2013, the company made 300 acquisitions.
American States Water
American States Water is a water and electricity company in the US. It has 50-year privatisation contracts with the US Government. The company provides water for approximately 246,000 customers and electricity for 23,000 customers. It operates in Big Bear Lake and California. It’s not quite part of the S&P 500, but is a component of the S&P 600.
Why invest in water stocks?
Water is something that we continue to pay for during a recession — which makes water stocks defensive. As we’ll continue to need water, people tend to feel confident that these stocks will continue to perform. You’re unlikely to see large gains in small periods — these stocks should grow quite gradually. Investors tend to choose defensive stocks, like water stocks, as part of a diversified and balanced portfolio.
The risks of water stocks
It might not seem like it, but water is a finite resource. We have no alternative if we were to run out. More than 97% of the water on earth is saltwater, which can’t be used for drinking or crops. We can only safely consume around 1%.
Alongside this, most governments regulate the supply of water. Ofwat carries out price limits which sets wholesale price controls, which means that there’s a price cap they must adhere to, which is reviewed every 5 years.
Whether you’re making a cup of tea, flushing your loo, diving into a swimming pool or just pouring yourself a glass, water is a pretty important part of our day to day lives. There are water companies that are listed on stock exchanges, but a lot of UK water companies are privately owned. You can expand to international water stocks.
Frequently asked questions
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