10 Best Water Stocks In Canada (Feb 2023)

Nearly half the population of the globe suffers from water shortage for at least one month a year.

Clean water is even rarer, at least for one-tenth of the global population.

Due to drastic climate change, water shortages are expected to impact two-thirds of the world’s population by 2025.

So from an investment perspective, investing in the best water stocks in Canada could be an interesting proposition.

Best Water Stocks In Canada

The TSX has a handful of stocks tied directly to water, which I mention below. But if you are open to invest in US securities, you can get access to a much richer and more dynamic pool of water stocks, so I have included a few of those as well.

1. Primo Water (TSX/NYSE)

 Primo Water
  • Ticker: PRMW.TO
  • Forward Dividend Yield: 2.15%
  • Dividend Payout Ratio: N/A
  • Dividend Yield (12-Month Trailing): 1.31%
  • Upcoming Dividend Date: Dec 09, 2022
  • Market Cap: $3.30 Billion
  • Forward P/E Ratio: 17.48
  • Average Analyst Rating: 2.0 - Buy

It’s a Tampa-based bottled water company that sells 5-gallon water bottles, both prefilled and offers refill. It also sells water dispensers for the bottles. The company has an extensive reach in the US and Canada, and its water bottles can be found in around 25,000 retailers.

The company also offers water delivery services and exchanges your empty water bottle for a filled one, which makes a lot of sense from a recycling perspective.

It’s a steady business because once people get comfortable with their water vendor, they are highly unlikely to change.

This stability is reflected in its financials as well as its stock, which has recently settled into a modest growth pace.

2. Global Water Resources (TSX/NASDAQ)

Global Water Resources
  • Ticker: GWR.TO
  • Forward Dividend Yield: 2.08%
  • Dividend Payout Ratio: 139.66%
  • Dividend Yield (12-Month Trailing): 1.67%
  • Upcoming Dividend Date: Jan 31, 2023
  • Market Cap: $453.27 Million
  • Forward P/E Ratio: 267.86
  • Average Analyst Rating: 2.0 - Buy

It’s another US-based water company that trades on the TSX. It’s a water resource management company that caters to metropolitan Phoenix (in Arizona, US) through its 17 water and wastewater facilities.

The company’s focus is not just on distribution but on wastewater treatment and water sustainability, making it a more future-facing company.

The idea is to control the whole water cycle and capture as much of it as possible. If successful, GWR can port its model to other areas, and hypothetically, the growth can be phenomenal. The stock growth has been quite decent as well, especially in the last ten years when the stock grew over 700%.

3. H2O Innovation Stock (TSXV)

H2O Innovation Stock
  • Ticker: HEO.TO
  • Forward Dividend Yield: N/A
  • Market Cap: $222.32 Million
  • Forward P/E Ratio: 24.7

H2O Innovation is a micro-cap stock that markets itself as a company that offers a complete set of “water solutions.” It has three business wings: Water technologies and services, operations and maintenance of the technology solutions they offer to the clients, and specialty products.

Despite its relatively small size, the company has managed to grow its national presence via acquisitions.

The H2O Innovation stock used to be radically different two decades ago. For most of the last decade, it traded as a mere fraction of its former self and only saw some growth post-pandemic. It might be a good buy if it’s going through a natural recovery.

4. Water Ways Technologies Stock (TSXV)

Water Ways Technologies Stock
  • Ticker: WWT.V
  • Forward Dividend Yield: N/A
  • Market Cap: $18.96 Million

Another micro-cap stock, this one on the lower end, is Water Ways Technologies. This one focuses on irrigation and water systems related to crops – An avenue that consumes about 70% of all the fresh water in the world.

The small company has a huge reach, i.e., 400 customers in 40 countries. Many of its projects deal with unique agriculture challenges.

The company is listed in Canada, but it’s based in Israel. It’s also entering the market of Cannabis growth with its innovative solutions. The stock joined the TSX in 2019, and so far, it has performed well. As a penny stock, it might carry more risk but also offer explosive growth opportunities.

5. BQE Water Stock (TSXV)

BQE Water Stock
  • Ticker: BQE.V
  • Forward Dividend Yield: N/A
  • Market Cap: $39.34 Million

BQE Water is a nano-cap company based in Vancouver. It’s a mine water management company. This means that instead of looking for, treating, preserving, or distributing freshwater, the company works on the proper treatment and disposal of water that “surfaces” during mining.

There are water “streams” under the surface that get released when mining companies dig.

The company’s job is to ensure that water doesn’t impact the mining operations. It also offers wastewater treatment for different industries. BQE Water has shrunken to a shadow of its former self.

The most prominent US water stocks might be considered a breed apart from their Canadian counterparts, primarily due to their magnitude.

American Water Stocks

6. American Water Works (NYSE)

American Water Works
  • Ticker: AWK
  • Forward Dividend Yield: 1.66%
  • Dividend Payout Ratio: 34.44%
  • Dividend Yield (12-Month Trailing): 1.61%
  • Upcoming Dividend Date: Mar 01, 2023
  • Market Cap: $28.55 Billion
  • Forward P/E Ratio: 32.85
  • Average Analyst Rating: 2.5 - Buy

American Water Works is the largest water and wastewater utility company in the US (by market cap and revenue) and has been operating for over 130 years.

It serves 3.4 million consumers, the bulk of whom reside in four out of several states the company operates in. A major segment of its clientele is the US military.

The stock has performed quite well over the last ten years and has grown almost 394% in that time. It also pays dividends, but its consistent growth and stable business would be the primary reason to invest in this water stock.

7. Xylem Stock (NYSE)

Xylem Stock
  • Ticker: XYL
  • Forward Dividend Yield: 1.23%
  • Dividend Payout Ratio: 50.00%
  • Dividend Yield (12-Month Trailing): 1.16%
  • Upcoming Dividend Date: Dec 20, 2022
  • Market Cap: $18.46 Billion
  • Forward P/E Ratio: 32.31
  • Average Analyst Rating: 2.6 - Hold

Another large-cap water stock, albeit a different one, is Xylem. It’s a water technology company that strives to find smart tech solutions related to water sustainability, refining, distribution, and wastewater treatment.

It operates via 30+ brands and has an extensive global footprint. The revenue is quite diversified, both by geography and the company’s offerings.

While Xylem’s long-term growth has been quite substantial so far, it hasn’t been very consistent.

However, its innovative approach and international presence make it a compelling long-term holding. It also makes its potential significantly more explosive compared to utility stocks which can realistically expand its business at a modest pace.

8. Essential Utilities Stock (NYSE)

Essential Utilities Stock
  • Ticker: WTRG
  • Forward Dividend Yield: 2.07%
  • Dividend Payout Ratio: 61.71%
  • Dividend Yield (12-Month Trailing): 2.33%
  • Upcoming Dividend Date: Mar 01, 2023
  • Market Cap: $12.34 Billion
  • Forward P/E Ratio: 24.9
  • Average Analyst Rating: 1.9 - Buy

Essential Utilities is both a water and natural gas company, but the bulk of its revenue comes from water. Geographically, the operations are highly concentrated in the state of Pennsylvania, but it does cater to several other states.

It caters to about three million people (water consumers only) and controls a network of over 13,874 miles of pipeline.

It’s an attractive dividend stock as well, with a modest yield and the safety of its business model. It also offers capital appreciation at a decent pace. Its long-term growth potential is quite amazing, so if you can hold it for decades, you can capitalize on a lot of the upside the company has to offer.

9. American States Water Stock (NYSE)

American States Water Stock
  • Ticker: AWR
  • Forward Dividend Yield: 1.82%
  • Dividend Payout Ratio: 59.34%
  • Dividend Yield (12-Month Trailing): 1.57%
  • Upcoming Dividend Date: Dec 01, 2022
  • Market Cap: $3.52 Billion
  • Forward P/E Ratio: 34.87
  • Average Analyst Rating: 3.0 - Hold

Another water service company that you can invest in is American States Water. It’s the parent company of three utility companies, two of which focus on water as a utility (one partially, one wholly).

One subsidiary caters primarily to California-based consumers (about 260,000), and the other serves military bases in 50 states. The company has a diversified business and an impressive national reach.

As a utility business with a stable consumer base, the company is a safe holding. But its return potential is quite impressive, though it leans more heavily towards capital appreciation than dividends.

10. Middlesex Water Company Stock (NASDAQ)

Middlesex Water Company Stock
  • Ticker: MSEX
  • Forward Dividend Yield: 1.26%
  • Dividend Payout Ratio: 51.00%
  • Dividend Yield (12-Month Trailing): 1.35%
  • Upcoming Dividend Date: Dec 01, 2022
  • Market Cap: $1.52 Billion
  • Forward P/E Ratio: 32.92
  • Average Analyst Rating: 1.0 - Strong Buy

The company has been around for almost 125 years, serving the communities of New Jersey and Delaware. It offers both regulatory and non-regulatory services related to water distribution and wastewater treatment.

It caters to both residential and commercial consumers, as well as serves the local municipality services. This makes its revenue streams a bit more diverse than many other water distribution companies.

The stock of this small-cap stock has been growing consistently for almost a decade now, and it might continue on that path for the foreseeable future.

Is Water A Good Stock To Buy?

As grim as it may seem, global warming is happening, and most experts agree that we might start seeing its drastic adverse effects in the next few decades. One of those effects is water scarcity.

And having a stake in companies that control cleaning and supply of water (among other things) can become beneficial over time.

In addition, many water-oriented utility companies, especially in the US, are financially healthy and profitable investments.

If you wish to raise the ESG profile of your portfolio, investing in water stocks can be a great way to do it.

However, this outlook should be taken with a grain of salt. Canada has the fourth-largest freshwater reserves in the world, so even if water scarcity causes the demand to spike, it will likely happen in Canada later than in most countries.

Michael Burry certainly thinks water is a good investment. However, he is investing in it in a more roundabout way.

How To Buy Water Stocks In Canada

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There is a characteristic difference between Canadian water stocks and US water stocks, which mostly hail from the utility sector. Most US stocks are good investments now and have reliable long-term holdings.

However, the Canadian stock is expected to shine and may bless the investors with spectacular growth under the right circumstances.

And if you would rather invest in a commodity that’s scarce now, consider helium stocks.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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