Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



This Rebounding Industry Will Always Have Demand

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect water-related companies to thrive over time as our planet's growing population keeps demanding clean water, the First Trust ISE Water Index ETF (NYSE: FIW  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The water ETF's expense ratio -- its annual fee -- is 0.6%. The fund is fairly small, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

This ETF has performed rather well, beating the world market over the past three and five years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

What's in it?
More than a handful of water-related companies had strong performances over the past year. Mueller Water  (NYSE: MWA  ) , for example, surged 100%. It had been challenged in recent years by struggling municipalities, but a recent earnings report was impressive, with management bullish about increased construction work. Municipalities are not a lost cause, either, as deteriorating infrastructures will eventually need to be updated. Mueller just signed a two-year deal with New Orleans that could generate $5 million in revenue.

Aqua America (NYSE: WTR  ) advanced 21%, making strategic acquisitions and selling off some businesses. It's also involved, via a joint venture, in supplying water to controversial natural-gas fracking operations. It sports much higher profit margins and more consistent earnings than many of its peers, pays a dividend yield of about 2.6%, and has been upping its dividend for 20 years in a row. It may not be the biggest bargain in water right now, though.

Agilent Technologies (NYSE: A  ) , maker of bioanalytical and measurement equipment for the water industry, among others, gained 8%. It just reported a weak third quarter, blaming a sluggish economy and projecting slower growth. My colleague Anders Bylund wonders whether it might simply be losing market share to smaller rivals, though.

Other companies didn't do so well last year but could see their fortunes change in years to come. Veolia Environnement (NYSE: VE  ) , for example, shed 5%, rebounding after being whacked largely by slowdowns in Europe, where it's based. Even after a dividend cut, it still offers an appealing dividend yield near 6.3% -- but some wonder whether that's in danger, given the company's debt load. Veolia has been cutting costs and selling some assets to address that. It has also been shifting its focus from waste to water and is a major player in the water world.

The big picture
Demand for water isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

If you're looking for more high-yielding stocks, check out our special free report, "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can access your copy today at no cost! Just click here to discover the winners we've picked.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Emerson Electric and Veolia Environnement, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Emerson Electric and Veolia Environnement. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 17, 2012, at 3:30 PM, DAG_Investments wrote:

    Many people predicted MWA would go bankrupt last year, but it has doubled my money in 10 months and is now my second best stock of the year.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2019519, ~/Articles/ArticleHandler.aspx, 5/29/2016 11:17:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 17,873.22 44.93 0.25%
S&P 500 2,099.06 8.96 0.43%
NASD 4,933.51 31.74 0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/27/2016 4:04 PM
A $45.82 Up +0.31 +0.68%
Agilent Technologi… CAPS Rating: ****
MWA $10.96 Up +0.03 +0.27%
Mueller Water Prod… CAPS Rating: ****
VEOEY $22.50 Up +0.15 +0.65%
Veolia Environneme… CAPS Rating: ****
WTR $32.32 Up +0.06 +0.19%
Aqua America CAPS Rating: ****