It’s official.
Last week, the Environmental Protection Agency (EPA) finalized a rule that limits the amount of “forever chemicals” in our water supply.
It’s the first-ever national regulation of its kind. And it means big changes ahead for one sector…
I first wrote to you about this last month for one important reason.
As regular readers know, at Intelligent Income Daily, we’re focused on finding the safest income investments on the market. When the government comes up with new rules that could have a big impact, we pay attention… and look for ways to help you profit.
And while this development means some companies will have to spend more in the short term, it’ll also create a profit opportunity for those who prepare now.
Let me give you a refresher on what’s going on. I’ll explain how the EPA’s new rule will affect our water systems… And I’ll show you one way to increase your bottom line while collecting a reliable income.
How the EPA’s New Rule Will Affect Our Water Systems
The EPA’s new rule targets a group of over 12,000 chemicals known as “PFAS” (per- and polyfluoroalkyl substances). They’re also commonly known as “forever chemicals” because they don’t break down easily and stay in the environment for a long time.
PFAS have been around since the 1940s, found in all kinds of common products like nonstick cookware, carpets, shampoo, and food packaging.
Scientists say PFAS can cause health problems such as increasing cholesterol, weakening the immune system, and increasing the risk of cancer. So it’s probably a good idea to keep these chemicals out of our bodies.
According to a study by the U.S. Geological Survey, at least 45% of tap water in America is estimated to have PFAS. Here’s how the new ruling aims to rein that in…
Imagine the amount of water it takes to fill five Olympic-sized swimming pools. Now imagine one drop among that.
That’s the lowest amount of PFAS laboratory equipment can reliably measure – 4 parts per trillion. It’s also the new limit the EPA is setting for the first time on several common PFAS chemicals in our drinking water.
Though the EPA is finalizing the rule now, it will take a few years for it to go into effect.
Water utilities across the country have until 2027 to start testing for PFAS. And they must remove PFAS from water to meet the limits starting in 2029.
But there’s a lot of work to be done to meet those guidelines by the required timelines…
Currently, about half of states in America have no regulations on the amount of PFAS allowed in water. And the EPA’s limit of 4 parts per trillion will be lower than the limits in all states except for one – Illinois.
That means water utilities across the country will need to spend a lot of money testing for PFAS, drilling new wells for clean water, and building new treatment facilities to filter out the chemicals.
The EPA estimates it will cost water utilities $1.5 billion per year to test for and remove PFAS.
But the American Water Works Association says the EPA’s estimate is way too low… and the actual cost will be more than three times higher.
How to Collect Reliable Income From Cleaner Water Systems
Who’s going to pay for all this?
The federal government is using $9 billion from the 2021 Bipartisan Infrastructure Law to help. And lawsuits against PFAS manufacturers like 3M and Dupont have secured over $11 billion in settlements to help clean up “forever chemicals.”
But that money will only last a few years. The whole process will take decades. And in the end, customers like you and me will end up paying the cost through higher water bills…
Now, unfortunately, there’s nothing we can do to prevent utilities from raising our bills. But there is a way to align our interests with theirs and collect growing income…
And that’s by investing in water utilities.
Water utilities will have to spend billions of dollars to upgrade their water systems to follow the EPA’s rules. And they may take a hit in the short term.
But utility company earnings are regulated based on the amount of infrastructure they own. So the money they spend on removing PFAS from water will increase their profits in time. And that means more dividends for shareholders.
Right now, there’s one water utility company I like trading at a discount…
Essential Utilities (WTRG) provides water service to customers in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, and Virginia. It also owns a gas utility in Pennsylvania and Kentucky.
The company estimates it will have to spend $450 million to meet the EPA’s new PFAS standards in the areas it serves. That’s money that will help grow its earnings in the years to come.
It’s also a reliable dividend payer that has increased its payout 31 years in a row. Right now, Essential Utilities yields 3.5% and trades at less than 18x earnings.
The company’s stock has historically traded at an average of 26x earnings, meaning its current levels present a 30% discount.
As these new government regulations go into effect, we can position ourselves to profit. And investing in a reliably growing dividend payer is a great way to boost your bottom line in the years to come.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily