When all is said and done, the final infrastructure bill may not look very much like the early Biden administration proposals, notes Genia Turanova, dividend investing expert and editor of Curzio Research's Unlimited Income.

The original bill proposal has some $110 billion dedicated to water infrastructure… such as lead pipe elimination and modernization of the country’s drinking water and wastewater systems.

If even a small portion of these funds are utilized for pipe improvements, it would do wonders for improving the aging water infrastructure in the U.S.

Many water companies, including Mueller Water (MWA), which provides repair and replacement products and services to water utilities, will benefit.

Originally, I recommended this overlooked company as a somewhat contrarian play. In December 2020, with the economy still reeling from COVID-related shutdowns, the budget outlook for cities and municipalities was still questionable.

Today, we’re beating back COVID, and many government policies bolster local finances. Although it will inevitably take time for the final bill to be approved and for the money to reach municipalities, MWA is in a great position to grow.

Every city needs fire hydrants (where MWA is an undisputed leader), pipes, and valves for repairs and new projects.

And with the booming housing market, water-infrastructure demand from new construction the sector where MWA generates more than a quarter (25-30%) of its business is also on the rise.

Mueller Water expects strong growth in the residential construction market to continue for the rest of the year. This will offset (and more) any temporary delays in municipal projects caused by the pandemic.

As a result, the company has nearly doubled its projections for 2021. It now expects 8%-10% sales growth for 2021 (vs. earlier guidance of 4%-6%).

There is one new risk with MWA’s business: inflation. Higher cost of raw materials like copper is a potential threat to the bottom line.

But the company is so well-positioned in its areas of expertise, it should have no trouble passing these cost increases on to its customers. This is why I’m keeping my “buy” recommendation on Mueller Water.

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