According to recent reports, water is getting more expensive. But how expensive and what is causing it become more expensive?
The key points you should think about when it comes to the water issues are presented below.
- More individuals in the United States will pay over twenty percent more for water as the water costs have been increasing over the past 15 years.
- Water and sewer bills steadily march upward over large portions of the United States.
- Cities in the United States may still have largely outdated infrastructure systems to deal with changing demands and potential acute weather events
Water is critical to human life. We tend to forget all about water but it is quite essential to helping us get on with each aspect of our day. Water is utilized even when you think it is not. For instance, did you know that water and energy go hand in hand? Water is used to generate electricity and electricity is used to clean and distribute clean water. That means that keeping a night light on or booting up a computer may rely on water in some part of the process (due to the need for electricity and water’s role in electricity production). It is critical for many people’s pristine lawns, for football fields, and for everything from waste management to the crop production.
It may be startling to note that water costs are rising gradually and will likely rise at a faster pace than inflation moving forward. So if water costs are rising, what should you do to prepare? But first, why are water costs rising?
It Costs More To Provide Water
It costs more to provide water due to lower quality or outdated infrastructure. That fundamental aspect, coupled with higher labor costs, and other factors contribute to water expenses rising. Water companies may not increase the cost of water immediately in some areas but are likely to do so as the need arises over the next few years. Remember that more storms can create more work thus increasing the price of water. On a similar vein, other parts of the country suffer from drought issues, causing shortages in water.
Recall that water rates may increase at a certain level like wastewater rates can jump higher due to other reasons.
Different utilities are addressing this need by providing solutions such as tiered pricing or water costs based on income.
Keep Your Costs Low
The first point is to ensure that you are keeping your water costs low, remember that a dollar saved is a dollar earned. There’s the obvious idea of instituting water saving appliances. These appliances may range from more efficient dishwashers to washing machines and other appliances that require water. Homeowners that upgrade to more streamlined faucets, shower heads, and other appliances or water utilization devices will can save over 5,000 gallons of water per year.
Of course, you also want to make sure that you are accounting for leaky pipes, faucets, or other issues that can increase your water costs.
This is a defensive action with regard to water costs but how can you profit from higher water costs?
Buy the Right Water Companies
A recent report notes “according to UN Water, global freshwater usage has been increasing at more than twice the rate of population growth, and freshwater scarcity is widely cited as a reason for future geopolitical conflicts.”
The catch is that many of these water utilities are already expensive by various financial metrics. At the same time, it is necessary to realize that these firms are going to be even more essential moving forward. Further, many of these utility companies provide decent dividends while offering price appreciation over time.
One potential stock to purchase is American Water Works (AWK). Analysts believe that this stock can increase over 100% over the next few years if the Federal Reserve keeps the interest rates low. Now, it seems as if the Federal Reserve has no choice but to keep interest rates low to meet their policy targets. At the same time, this company will likely increase its dividends over the next few years as well.
Essential Utilities (WTRG) is another firm to purchase as it also provides dividends and is expected to gain more appreciation over the next few years. A few analysts expect it to go from its current level to around $80 or more over the next few years. Of course, this is all depends on interests rates staying at their current levels, which as noted earlier will likely continue to take place due to high debt burdens on the part of the government, and corporations.
A few firms to think about are the Middlesex Water Company (MSEX) and York Water (YORW). Another compelling company is Xylem, it is more data oriented and accounts for water issues from a technology standpoint.
Of course, you can also invest in ETFs like PHO, FIW, CGW and PIO to get exposure to water.