Tag Archives: water

My ETF Pick List: ETFs For Risk And Value Seekers

Summary As the economy is slowing down, it is worth having a look at options to protect your portfolio such as a short ETF. People overestimate their investing skills and therefore are at risk of losing money which can be prevented. ETFs offer the opportunity to investors who simply lack the time or expertise of a certain fund, industry or country but would like to reap the benefits. The water industry has taken a hit the last few weeks, creating numerous buy opportunities. Some people advocate not to invest in ETFs because you diversify too much of your wealth, and as a result, you might diminish your return. Moreover, you pay an additional cost for buying an ETF (the expense ratio). Yet, statistics have always shown that passive traded funds have beaten active funds over an extended period of time . In the same article, it is also shown that a higher expense ratio is often linked to lower performance rates. Furthermore, investors overestimate their ability to predict market events and, therefore, take too much risk in the market. Reasons enough to have a look at what ETFs have to offer. In this article, I will keep it simple and show a wide availability of ETFs which I consider having significant potential for any kind of investor, retiree to value and risk seekers. I always divide a small portion of my portfolio to ETFs to diversify but also to improve my mathematical odds in regards to obtaining better than average returns. The mathematical probability that you pick a winner out of 30 stocks is lower than obtaining a positive return out of an ETF which tracks 30 stocks at once. Furthermore, I sometimes lack the experienced expertise in a specific sector and, therefore, an ETF is a perfect solution to that problem. ETFs for risk-seeking investors As some people are worried about the progress of economies in the world, such as Germany (and as a result slowing down growth and tumbling markets ) I picked a few ETFs which could take advantage of this situation. This is useful for investors who lack knowledge about how to use option strategies or futures to short a market. One can short the American stock market by, for example, buying the ProShares Short QQQ ETF (NYSEARCA: PSQ ) or buying the ProShares Short Dow 30 ETF (NYSEARCA: DOG ). Keep in mind that short ETFs comes at a higher price as their expense ratio is higher than a normal ETF. In Europe, one could use the ProShares UltraShort FTSE Europe ETF (NYSEARCA: EPV ) to short the stock market of England. Plenty of choices and whenever the market tumbles down I would recommend any of these ETFs if you don’t want to be exposed to higher leverage such as with options or futures. As the bull market has been strong the last few years, the short ETFs have been performing dreadfully: While the opposite ETF, the PowerShares QQQ Trust ETF (NASDAQ: QQQ ), has seen outstanding performance over the last 5 years: Just to prove an important point, this is the performance of QQQ in comparison to Ford (NYSE: F ), Boeing (NYSE: BA ), Wal-Mart (NYSE: WMT ) and Exxon Mobil (NYSE: XOM ), 4 large American multinationals: The graph clearly proves the point that holding these 4 large American multinationals would not have outperformed the market over a period of 5 years. This builds a case towards ETF-based investing, especially as the world of academia has shown many times that investors overestimate their ability to predict market events and, therefore, take too much risk on the stock market. One more argument to prove my point is an example of the economy of Brazil. Once a growth economy, now their currency is hitting a shattering low while unemployment is at a 5-year peak. The ProShares UltraShort MSCI Brazil Capped ETF (NYSEARCA: BZQ ) has been through the roof as a result: This was a much easier choice in comparison to cherry picking any of the stocks on the Brazilian market. ETFs to protect against rising interest rates Furthermore, there are products called Exchange Traded Notes, debt instruments which allow the investor to protect themselves against either rising or diminishing interest rates such as these steepeners and flatteners , the iPath U.S. Treasury Steepener ETN (NASDAQ: STPP ) and the iPath U.S. Treasury Flattener ETN (NASDAQ: FLAT ). ETFs for investors seeking value Deep value is hard to find when the stock market is priced at a high P/E. Finding a winner in a bucket of stocks is even more difficult. This is especially the case when it comes to more unknown stocks in sectors which are being ignored by most investors. One of those sectors is the water industry. The water industry comprises of firms that provide drinking water and waste-water services (including sewage water treatment) and irrigation solutions to homes, businesses and manufacturers. The Water Industry (click to enlarge) Source : Water UN The water industry does not receive as much coverage as the solar industry and electric car industry. In my view, this is because the water industry is a bit more boring than the solar and electric car industry. Yet, in my view, it shouldn’t be and there are good reasons for that. Only half a percent of fresh water is being used worldwide while over 1 billion people are still having severe water supply issues: Source : Water UN The water scarcity problem will become much more severe in the coming years: (click to enlarge) Source : Water UN There are 3 water ETFs that play their own individual role in battling the issues of water scarcity. I’ve covered all 3 on Seeking Alpha before: the First Trust ISE Water Index ETF (NYSEARCA: FIW ), the PowerShares Global Water Portfolio ETF (NYSEARCA: PIO ) and the PowerShares Water Resources Portfolio ETF (NYSEARCA: PHO ). Their overall share prices have fallen over the last few months, opening a potential entry point. Conclusion This article is important as it perfectly addresses many of the issues numerous investors currently face – not having the expertise to invest in a sector due to lack of time, wary of investing due to the bull market and the realization that many investors don’t obtain profitable returns overall. Investors tend to overestimate their skills and not every investor is successful. Yet, by following a simple basket of stocks, you enhance your chances of obtaining a positive return while lowering your overall risk. The Brazil ETF clearly indicates that you can also obtain solid above average returns with ETFs. ETFs are an important part of my portfolio due to the above-mentioned reasons. Yet I also hold numerous stocks and financial derivatives in my portfolio (as I work in that specific industry) and consider myself knowledgeable on the industry those firms are active in. When it becomes too specific, I consider ETFs as a good alternative choice. Therefore, I consider the water ETFs as a good value investment for the future. The underlying fundamentals of the water scarcity problems are so underestimated currently in the world that it’s simply a waiting game until investments in these firms will grow significantly. Now is the time to buy these firms. Scarcity of water will spur bright technologists and scientists to invent large scale new technologies in this industry. This will become a very profitable commerce in the future.

Dividend Growth Stock Overview: Connecticut Water Service, Inc.

Summary CTWS provides water service to 123,000 customers in Connecticut and Maine. The water and wastewater utility segment provides over 90% of its income. The company has increased dividends since 1970. Over the last two decades, CTWS has grown its dividend at less than 2% annually. CTWS has a payout ratio of 55%, and the stock currently yields 3%. About Connecticut Water Service Connecticut Water Service, Inc. (NASDAQ: CTWS ) provides water utility services to over 123,000 customers across portions of Connecticut and Maine. The company employs 265 people and is headquartered in southeastern Connecticut. The company has 5 wholly owned subsidiaries, two of which cover Connecticut Water’s regulated utility business. The Connecticut Water Company and The Maine Water Company serve a population of about 400,000 people in their respective service areas. The Connecticut Water Company is the company’s original business, while The Maine Water Company was formerly Aqua America’s Aqua Maine subsidiary. The subsidiary was acquired at the beginning of 2012 for $35.6 million. Connecticut Water Services’ business is organized into three segments: Water Activities, Real Estate Transactions, and Services and Rentals. The Water Activities segment covers Connecticut Water’s regulated companies’ activities; the segment includes 2,100 miles of water mains, and a reservoir storage capacity of 9.4 billion gallons. The segment’s 239 active wells and 25 surface water sources is capable of supplying 176 million gallons per day. This segment provided 93% of Connecticut Water’s total net income in 2014. The Real Estate Transactions segment is responsible for disposing of Connecticut Water’s real estate holdings when they no longer serve the company’s needs. The company will sell or donate for income tax benefits the real estate holdings. This segment’s contribution to the total company’s net income is negligible; in 2014, this segment earned $50,000. The Services and Rentals segment provides contracted services to other water and wastewater utilities, like operating facilities under contract. This segment is also responsible for marketing and operating the optional service line protection program offered by Connecticut Water, which covers the cost of repairs to a broken water service line. At the end of 2014, 20,000 customers had signed up for the program in Connecticut and 2,000 had signed up in Maine. In general, this segment provides 7 – 10% of the company’s total net income; it was 7% in 2014. In 2014, Connecticut Water earned a total of $21.3 million on $94.0 million in revenues, numbers that were up 16.7% and 2.8%, respectively. The large increase in income was due an authorized increase in water rates and a reduction in income taxes. Earnings per share were up commensurately by 16.1% to $1.95. With the current annualized dividend of $1.07, the company’s current payout ratio is 54.9%. The company’s book value increased by 5% to $18.83 at the end of 2014. The company’s debt stayed flat year-over-year; the company has a debt-to-equity ratio of 84%. The company has authorized a stock repurchase program that allows for the purchase of up to 10% of the company’s total outstanding shares. The company has not purchased any shares under the program and stated in its 2014 10-K filing that it has no plans to do so. The company is a member of the Russell 2000 index and trades under the ticker symbol CTWS. Dividend and Stock Split History (click to enlarge) Connecticut Water Service has compounded dividends at about 2.7% since 2010. Connecticut Water has increased dividends since 1970. The company regularly announces increases in mid-August, with the stock going ex-dividend at the end of August. In August 2015, Connecticut Water announced a 3.9% increase in its dividend to an annualized rate of $1.07 per share. Connecticut Water should announce its 46th annual dividend increase in August 2016. Connecticut Water has grown its dividend extremely slowly over its history. For the last 20 years, the company has increased the year-over-year quarterly dividend by no more than a penny, resulting in a 5-year dividend growth rate of 2.68%. Longer term, the dividend growth rates are even slower, with 10-year and 20-year dividend growth rates of 2.20% and 1.72%, respectively. The company has split its stock twice, both times 3-for-2. The most recent stock split occurred in September 2001. Prior to that, Connecticut Water split its stock in September 1998. For each share purchased prior to September 1998, you would now have 2.25 shares of Connecticut Water stock. Over the 5 years ending on December 31, 2014, Connecticut Water Service stock appreciated at an annualized rate of 11.28%, from a split-adjusted $20.97 to $35.78. This underperformed the 13.0% compounded return of the S&P 500 and the 14.0% compounded return of the Russell 2000 Small Cap indices over the same period. Direct Purchase and Dividend Reinvestment Plans Connecticut Water Service has both direct purchase and dividend reinvestment plans. You must already be an investor in Connecticut Water Service to participate in the plans. The minimum amount for the direct purchase plan is $25. The dividend reinvestment plan allows for partial reinvestment of dividends. The plans’ fee structures are somewhat favorable for investors, with the company picking up all costs on stock purchases. However, when you sell your shares you’ll pay a sales commission of $15. In addition, if you withdraw from the dividend reinvestment plan completely, you will pay a termination fee of $35. All fees will be deducted from the stock sales proceeds. Helpful Links Connecticut Water Service’s Investor Relations Website Current quote and financial summary for Connecticut Water Service (finviz.com) Information on the direct purchase and dividend reinvestment plans for Connecticut Water Service Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.