Make Money With Life's Necessity

Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Have you ever tried to live without water? It’s something that all humans need to survive and there are companies out there that make their money by delivering clean water to homes. Let’s take a look at some of these companies, we can start with the Brazilian firm, Companhia de Saneamento Basico (NYSE: SBS).

Companhia de Saneamento Basico

If you want to diversify your portfolio both out of the United States and into water then Sabesp could be a great choice for you. The company engages in water and sewage services to residential, commercial and industrial entities in Sao Paulo, Brazil. The company has 26.7 million customers which is around three-fifths of the Sau Paulo state.

Sabesp has continued sales growth over the last decade, but net income took a little dip in the last fiscal year due to increased infrastructure investment. The company earned $5.90 a share in FY 2011 and by 2013 that figure is expected to be $9.26, that’s almost 57% growth in earnings over two years!

A major risk associated with this company is its ties to the Brazilian Real. The currency could be considered overinflated and such inherent risk may be considered too much for some investors. If you believe in the long term Brazilian growth, this is a stock for you.

American Water Works

American Water Works (NYSE: AWK) is a water utilities operator in the United States and Canada. The company focuses on providing drinking water and waste water systems around both the U.S. and Canada, providing their services to over 16.2 million customers in more than 32 states.

American Water Works has seen sales growth over their time on the NYSE and the company is also turning a profit, something it has done over the past two years. Earnings in FY 2011 were $1.75 per share. Those earnings are expected to grow to $2.21 in FY 2013 representing 26% growth over the two year period. Nothing to scoff at but not really in the same league as the 57% growth that Sabesp is expected to give out.

American Water Works offers a 2.6% yield to investors and the analysts love the company with a mean recommendation of 1.31. Eleven of the thirteen analysts covering the stock have a “Strong Buy” rating upon it.

Aqua America

Aqua America (NYSE: WTR), like the previous two companies, offers water treatment services to consumers. Aqua America has 2.8 million residential customers in twelve states. The company’s plan is to continue expansion throughout the United States via acquisitions of struggling state run services or large private entities in the field.

Sales and net income have grown year after year at Aqua America. The company saw $0.94 earnings per share in fiscal year 2011 and they are expected to grow to $1.19 by FY 2013 end which represents a 26.5% growth rate.

Comparing Aqua America to American Water Works in terms of potential growth by FY 2013 end you see that they are both similar. AWK offers the best P/E if you want to get in right now as Aqua America is slightly elevated.

Final Verdict

All three companies are investable. Aqua America (2.8%) and American Water Works (2.6%) both offer investors a reasonable dividend while Sabesp presents the potential for incredible growth from a utility.

 


Ash1402 owns shares of Aqua America. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Companhia de Saneamento Basico (ADR) and Aqua America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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