7 Best Water Stocks and ETFs to Buy
Utilities, infrastructure companies, manufacturers, testing and metering firms, and companies that clean up polluted water all offer investors exposure to the ultimate have-to-have commodity.
“Water has no substitute, is used in various sectors from agriculture to technology, is essential for human life and has inelastic demand — meaning that an increase in price does not lead to a decrease in demand,” says Peter Klein, chief investment officer at Aline Wealth.
Water isn’t just crucial for keeping people, crops and animals alive. It’s also necessary for all sorts of manufacturing processes, sanitation, mining, energy production and data centers that power artificial intelligence and the internet.
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While demand is increasing as the global population grows, becomes more urban and increases standards of living, supply is at risk as climate change makes droughts worse.
At the same time, aging infrastructure poses a challenge to meeting demand for water even as the need to deal with a group of chemicals known as PFAS, often called “forever chemicals,” in the water system gains attention.
“There is a significant opportunity to remediate PFAS contamination, estimated to be a $250 billion addressable market,” Klein says.
Although the administration of President Donald Trump did away with a plan to set federal PFAS discharge limits, Chris Ottinger, investment analyst at Tortoise Capital, points out that the move does not completely eliminate limits in the future, although it delays the process. States have their own limits, but many have waited on federal guidance to enhance monitoring and treatment requirements, he says.
Still, the private sector seems likely to continue to provide PFAS remediation services given that the chemicals have been linked to a host of human ailments, have been found throughout the natural world, and are behind a surge in litigation facing the chemicals and plastics industries.
“These man-made chemicals are so long-lasting that scientists haven’t been able to reliably identify how long it might take for them to break down,” Klein says. “They are thought to be present in the blood of nearly every American.”
With that backdrop, investors interested in water should consider these investments:
| Stock/ETF | Focus Area |
| American Water Works Co. Inc. (ticker: AWK) | Water and wastewater utility |
| Essential Utilities Inc. (WTRG) | Water, wastewater and natural gas utility |
| Xylem Inc. (XYL) | Water technology |
| Badger Meter Inc. (BMI) | Smart meters and data analytics |
| Invesco Water Resources ETF (PHO) | Water conservation, purification |
| First Trust Water ETF (FIW) | Water distribution, infrastructure, purification |
| Invesco S&P Global Water Index ETF (CGW) | Water utilities and suppliers |
American Water Works Co. Inc. (AWK)
Utilities are considered defensive plays because people and businesses will need water regardless of what the economy is doing. Although utilities won’t outperform growth stocks in bullish times, investors are glad to have them when risk-off sentiment kicks in.
“Water utilities should outperform water industrials during periods of volatility, especially such as the recent bouts of tariff turmoil,” Ottinger says. “Headwinds of higher interest rates may persist, but the market will seek flight-to-safety until broader macroeconomic clarity and calmness occurs.”
American Water Works is one of the largest utilities of any type and is bigger than some electricity providers. As the largest regulated water and wastewater utility in the U.S., the company provides services to residences, public buildings and businesses. It also has long-term military contracts that provide an extra layer of stability.
Essential Utilities Inc. (WTRG)
“Water stocks are almost synonymous with dividend stocks, which makes them a great option in volatile, uncertain markets like the one we’re in now,” says Michael Martin, vice president of market strategy at TradingBlock.
Essential Utilities is his favorite stock given its yield above 3% and its exposure to another commodity currently key to modern life.
In addition to operating similar water and wastewater infrastructure to American Water Works, Essential Utilities also provides natural gas-related services to customers in Pennsylvania and Kentucky.
This layer of diversification dilutes what would otherwise be a direct play on water, but that may be appealing to some investors who want to hedge their bets a bit with natural gas.
Xylem Inc. (XYL)
Named for the plant tissue that transports water and nutrients up from the soil, Xylem has utility, industrial, commercial and residential customers around the world.
While the stock faces headwinds in the current environment of risk-off sentiment and tariffs, it remains a good name for exposure to the water theme, Ottinger says.
The company has offerings spanning the entire water cycle and a successful track record of adding new technologies to its product offerings through merger-and-acquisition activity, he says.
The company’s future growth is tied to utilities adopting new technology for managing water supply, reducing water loss and treating water, and near-term risks include tariff-related volatility and the potential for slowing economic growth, Ottinger says.
“Water industrials should benefit from positive spending trends by water utilities on water smart meters and treatment technologies over the long term,” he says. “However, potential rollback of formal PFAS regulations by the new administration poses a threat to providers of PFAS detection and remediation.”
[READ: 6 Best Green Hydrogen Stocks and ETFs to Buy]
Badger Meter Inc. (BMI)
You can think of companies that supply utilities with hardware and other solutions as a picks-and-shovels play in the water stocks world.
Badger Meter makes metering products that use flow measurement and control technologies for the municipal, commercial and industrial sectors. Its portfolio of products includes a mix of hardware, communications, data visualization, and analytics software and support.
The end goal of smart meters is to help water utilities reduce water loss through leak detection and software for predictive maintenance, Ottinger says.
While utility spending on such technology could take a hit in an economic downturn, it’s likely that demand for water-loss reduction will increase over time as freshwater supplies are pressured by population growth and climate change.
Invesco Water Resources ETF (PHO)
Because the water industry is made up of many types of companies operating in jurisdictions around the globe, investors may want to consider exchange-traded funds, or ETFs, that bundle many water stocks under one ticker symbol.
While an ETF probably won’t perform as well as a single stock that strikes it rich, these funds offer diversification to cushion portfolios if a single company tanks.
PHO invests in companies that create products that conserve and purify water for homes, businesses and industries.
With about $2 billion in assets, PHO is one of the largest water ETFs traded in the U.S. It has an expense ratio of 0.59%, or $59 in annual fees on a $10,000 investment. Its average annual return over the past five years is 13.3%.
First Trust Water ETF (FIW)
This well-established water fund tracks an index of companies that derive a substantial portion of their revenues from the potable and wastewater industry.
Companies in the index are involved in water distribution; infrastructure such as pumps, pipes and valves; purification and filtration; and ancillary services like consulting, construction and metering.
More than half of the fund is devoted to industrials, with utilities making up about 17% of its holdings.
While utilities may outperform during times of economic turbulence and uncertainty, Ottinger says that water stocks in the industrials sector should benefit from positive spending trends by water utilities on smart meters and treatment technologies over the long term.
FIW has an expense ratio of 0.53% and $1.7 billion in assets.
Invesco S&P Global Water Index ETF (CGW)
In addition to owning lots of different companies, investors can seek diversification by geography, a strategy that can offer some cushion if certain economies are doing better than others.
This fund tracks an index composed of global developed-market securities, including water utilities and companies involved in infrastructure, equipment, instruments and materials.
The biggest country allocation is to the U.S., but the fund’s holdings also include companies in the U.K., Switzerland, Brazil and France, among others.
The fund holds $885 million in assets, and it has an expense ratio of 0.59%.
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7 Best Water Stocks and ETFs to Buy originally appeared on usnews.com
Update 04/18/25: This story was previously published at an earlier date and has been updated with new information.