Dollars and Drought

05/26/2015 8:00 am EST

Focus: STOCKS

Glenn Rogers

Contributing Editor, Internet Wealth Builder and The Income Investor

In California we are experiencing a severe drought that has been going on for nearly five long years; clearly, something dramatic has to happen with the water infrastructure in the state, asserts Glenn Rogers, editor of Internet Wealth Builder.

And California is not the only place in the world struggling to meet the water needs of a growing population. Vast parts of the globe do not have nearly enough water to drink and support their agricultural needs.

So how can investors benefit from this obvious crisis? If you want a quick and easy way to invest in water-related companies, you could simply buy an ETF or mutual fund.

ETFs include First Trust ISE Water (FIW), Guggenheim S&P Global Water (CGW), PowerShares Global Water Resources (PIO), and PowerSharesWater Resources (PHO).

There are also two mutual funds focused on this area, Calvert Global Water (CFWAX) or AllianzGl Global Water (AWTAX).

Alternatively, you can buy individual stocks; one that is especially interesting is Xylem, Inc. (XYL).

Xylem is based in Rye Brook, New York but has a global footprint. It does business in 150 countries with over 12,500 employees.

Growth is generated by all the things troubling California: water scarcity, urbanization, population growth, environmental protection issues, and infrastructure needs.

The projects it undertakes are varied and imaginative. For example, after a massive flood overwhelmed Beijing’s storm water system, the Chinese capital has begun installing Xylem’s submersible pumps.

By installing new Xylem pumps, the wastewater company that serves Lake Como—Italy’s national and natural treasure—is keeping the lake clean and costs down.

Xylem pumps also handle the flow of wastewater and storm water at New York’s Yankee Stadium. 

Xylem has a strong balance sheet and the company generates lots of cash. With a current annual dividend of $0.52 per share, the stock yields 1.4%. Buy with a target of $45.

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Pumping Profits: Layne Christensen

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