Much has been published about the growing need for water infrastructure investing. While most of it deals with the needs of China and other emerging markets lacking basic infrastructure, the need in the United States is just as great. A recent New York Times study concluded that nearly 20% of the water treatment facilities have violated provisions of the Safe Water Drinking Act over the last five years. The report also stated that since 2004, the drinking water supplied for 49 million residents contained illegal concentrations of chemicals. These included arsenic, radioactive substances including uranium and dangerous bacteria normally found in sewage.

IN PICTURES: Digging Out Of Debt In 8 Steps

A Rising Problem
Off the Southern Gulf Coast, fertilizer runoff has produced a dead zone for coral and marine life. Across the nation, methyl tertiary butyl ether, an additive in unleaded gasoline, can be found in heavy doses in well water. The Environmental Protection Agency estimates that improving America's aging water infrastructure will cost $277 billion over the next 15 years. These examples of pollution highlight the dangers of our aging water system here in the U.S. and the need for investment. Index funds such as the PowerShares Water Resources (NYSE:PHO) could be great long term investments as the U.S. tackles the growing problem. However, there are several companies involved with water purification and infrastructure that can be had for the price of a case of Coca-Cola's (NYSE:KO) Dasani brand water.

Three Low Price Water Picks
Currently trading for around $5, former Walter Energy (NYSE:WLT) spinoff, Mueller Water Products (NYSE:MWA) manufactures a range of pipes, flow control systems and various water infrastructure components. Mueller should do well as governments around the country wake up and realize that they cannot ignore the growing problems beneath their feet. The company seems bullish on its future by reaffirming its dividend. Shares of the company yield 1.4%.

Water utility, Cascal N.V. (NYSE:HOO) operates water and wastewater treatment plants in the United Kingdom as well as several emerging markets across the globe. Its British operations, which accounted for 51% of revenue in 2009, provide highly regulated stable income for the utility. Cascal has been able to translate those revenues into investments into higher growth regions such as China, South Africa and Indonesia. Currently, Cascal has no United States operations, but as fellow Investopedia Analyst Eric Fox points out, Cascal has stated that it is looking to break into the United States Market. (To read that article, see A Major Player In The World Water Business.)

For a water utility closer to home with a $6 share price, Southwest Water (NASDAQ:SWWC) also offers investors a treasury beating a 3.3% dividend yield. The company operates water utilities in four states and provides services in two others. Southwest had the distinction of being the best performing water utility in 2009, rising around 80%. Even with those market beating gains, the stock still trades at about half of its 2007 levels.

The Bottom Line
With more and more information coming forth on just how bad our aging water infrastructure is, the argument for investment keeps getting stronger. National and regional governments can only ignore the problem for so long. Mueller, Cascal and Southwest Water offer three ways to play the need for infrastructure improvements while costing less than the price of a new hose.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Filed Under:
Tickers in this Article: PHO, MWA, WLT, HOO, SWWC, KO

comments powered by Disqus

Trading Center