2 Water ETFs that Will Benefit from Bipartisan Infrastructure Bill

Amid growing climate change concerns, a clean-water shortage is becoming a serious concern worldwide, particularly considering the rising frequency of droughts. The federal government officially declared the first-ever water shortage in the Colorado River basin this month. Also, $8.3 billion within the $1 trillion infrastructure bill has been proposed for water-related projects. If passed into law, the spending is expected to boost the water utility industry's growth in the coming years.

The United States is not the only country taking steps to increase access to and store and transport clean water. The governments of several other countries are also investing heavily in water-related infrastructure.

While it’s challenging to select the best stock in the Water utility industry, we think investors looking to capitalize on the industry’s growth in a less risky way could bet on quality Water ETFs Invesco Water Resources ETF (PHO) and First Trust Water ETF (FIW).

Invesco Water Resources ETF (PHO)

PHO is an exchange-traded fund that was launched and is managed by Invesco Capital Management LLC. It invests in companies that operate across utilities and water sectors. The fund seeks to track the NASDAQ OMX US Water Index's performance using a  full-replication technique.

With $1.97 billion in AUM, PHO’s top holding is Waters Corporation (WAT), which has a 9.15% weighting in the fund, followed by Danaher Corporation (DHR) at 9.04% and American Water Works Company, Inc. (AWK) at 8.46%. It has a 0.60% expense ratio,  versus  the 0.57% category average.

PHO pays a $0.15 annual dividend, which yields 0.26% at its  prevailing share price. The ETF’s average four-year dividend yield stands at 0.41%. PHO has gained 45.7% in price over the past year and nearly 29.8% over the past nine months.

PHO’s POWR Ratings are consistent with its growth outlook. It has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Buy & Hold and Trade, and a B grade for Peer.

PHO is ranked #1 of 6 ETFs in the B-rated Water Equities ETFs group. Click here to see all the PHO ratings.

First Trust Water ETF (FIW)

Launched and managed by First Trust Advisors L.P., FIW invests in companies that operate across utilities, water utilities, and wastewater treatment sectors. The fund seeks to track the ISE Clean Edge Water Index's performance using a full-replication technique.

DHR has a 4.86% weighting in the fund as its top holding, followed by Agilent Technologies, Inc. (A) at 4.75% and Pentair plc (PNR) at 4.73%. FIW has $1.29 billion in AUM, and its  0.54% expense ratio is lower than the 0.57% category average.

FIW pays $0.38 annually in dividends, which yields 0.42% at its current share price. Its average four-year dividend yield stands at 0.67%. Over the past year, the fund has gained 48%. Also, it has gained 28.5% over the past nine months.

It’s no surprise that FIW has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Trade, Buy & Hold, and Peer.

Click here to access all FIW’s grades. FIW is ranked #2 in the same group.

PHO shares were trading at $58.65 per share on Friday afternoon, up $0.58 (+1.00%). Year-to-date, PHO has gained 26.44%, versus a 21.23% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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