Profitability is one of this company’s strong suits, as currently Aqua America Inc (NYSE:WTR) possesses a profit margin of 25.90%. Analysts see this margin decreasing to 24.7% by 2017. Quarterly dividends of $0.19 put the yield of the company’s dividend at 2.44%; and with a price to earnings ratio of 22.02, the company does not appear to be vastly overpriced.
Veolia Environnement SA (ADR) (NYSE:VE)
This French company operates in the 3 segments: water, waste, and energy management; and is much less a direct play on the water aspect than the other three companies.
In 2012, the company pumped out $38.31 billion in revenue, however projections place revenue only topping $32.42 billion by 2016. The profitability factor of the company is weak, as currently the profit margin of the company only sits at 1.3%, however expectations are that this metric will rise to 2.3% by 2016.
The company pays out annual dividends, $0.93 most recently, which places the yield at 8.15%. As a result of weakness in the profit margin, the company presently possesses a price to earnings ratio of 614.72.
American Water Works Co., Inc. (NYSE:AWK)
American Water Works provides drinking water, wastewater, and other water related services to roughly 15 million people in more than 30 states and in two Canadian provinces.
In 2012, the company generated $2.87 billion in revenue, and projections expect revenue topping $3.48 billion by 2017. Profitability metrics of the company are strong, with a 12.4% profit margin currently being sustained, and projections display the profit margin strengthening to 14.7% by 2017. Quarterly dividends of $0.28 place the dividend yield at 2.77%.
Additionally, a reasonable valuation is pinned to the company, with a price to earnings ratio of 18.82.
The Foolish Bottom Line
The American energy boom has begun, and is here to stay. Fracking will lead this revolution, as its economic benefits simply outweigh its disadvantages. Talk to 10 different analysts, and they may tell you 10 different ways to play this boom.
However I believe the water service companies such as the four outlined in this article are a rather compelling method in which to play the trend. Which one fits your portfolio depends.
If you are you looking for growth go with Xylem, for dividends consider Veolia. All in all, this particular industry stands to cash in majorly on the upcoming American energy boom as a result of the necessity of water during the fracking process, and investors should capitalize on this fundamental trend by positioning themselves in water service companies.
Ryan Guenette has no position in any stocks mentioned. The Motley Fool recommends Aqua America and Veolia Environnement (NYSE:VE) (ADR).
The article How Should Investors Capitalize on the American Energy Boom? originally appeared on Fool.com and is written by Ryan Guenette.
Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
