What will be more valuable in 20, 30, or 50 years from now -- a gallon of drinking water or a gallon of gasoline?

My bet is on water. I can imagine -- even yearn for -- living in a world without most so-called necessities (cars, TVs, yoga mats), but I cannot envision life on this planet without water. Yet America and the world better get prepared for a future with less and less available. An Interior Department study released in April said three major western river basins providing water to eight states could decline by as much as 8 to 14% over the next 40 years ... and this region is the fastest growing in the U.S.

I’m not saying start filling up your bathtub right now, I'm just suggesting taking a good long look at buying into a water utility company to help your portfolio grow -- if not for yourself, then for your children.

Let’s go dowsing
What should we look for in a water utility? No leaky pipes, a decent dividend, and a history of doling out increasing amounts year after year (five years at a minimum). And check that payout ratio. What’s the point of getting a nice dividend if the company won’t be able to pay it a few years from now? 

For a start here are four companies to consider:

Company

Yield

(2010)

Years of Increased Dividends

Payout Ratio

 

Aqua America
(NYSE: WTR)

3.4%

19

62%

American States
Water
(NYSE: AWR)

3.1%

57

60%

American Water
Works
(NYSE: AWK)

3.8%

2

53%

California Water
Service Group
(NYSE: CWT)

3.3%

43

65%

Sources: Fool.com and dividendinvestor.com.

Which one?
Aqua America has the best net profit margin. At 17.1, it is approximately twice as efficient as the other three. American Water Works has been around for more than 100 years but, as you probably noticed, has increased its dividend for only two years ... after going public in 2008. American States distributes and sells water in California, as does California Water Service Group. Payout ratios are all in a reasonable range and dividend yields are clustered around the industry average of 3%.

My divining rod is twitching toward Aqua America. Nineteen straight years of dividend growth certainly shows a commitment to the investor. Even though American States has shown an even longer commitment, I want to stay with a larger company. And there’s another metric called EVA momentum, which fellow Fool Dan Dzombak writes about in regard to Aqua America’s management creating value in the company. I plan on purchasing shares in Aqua America in the coming weeks.

Fool Contributor Dan Radovsky does not yet own shares in any of the above companies but plans to change that soon. The Motley Fool owns shares of California Water Service Group. Motley Fool newsletter services have recommended buying shares of Aqua America and California Water Service Group. 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.