While much of the Biden Administration’s infrastructure package is bogged down in negotiations… water is receiving special treatment. 

Water and wastewater infrastructure in the country is aging, and the need for upgrades is urgent. The direct losses from water main breaks alone could be as high as $2.6 billion a year.

In late April, the U.S. Senate passed the $36 billion Drinking Water and Wastewater Infrastructure Act in a bipartisan vote.

The future of the bill is unclear, though: It could be considered in the House of Representatives on its own… But it’s more likely to become part of the all-encompassing infrastructure proposal from the Biden Administration—which has already dedicated $110 billion to modernizing our water infrastructure.

At this point, there’s no telling how much money will actually be allocated to water infrastructure. But if even a small portion is utilized for pipe improvements, it would do wonders for improving water infrastructure in the U.S. 

Many water companies will benefit, but there’s one that leads the industry in several important categories… 

Mueller Water (MWA) provides repair and replacement products and services to water utilities. 

Back in December, I recommended this overlooked small-cap company as a contrarian play to my Unlimited Income subscribers. At the time, with the economy still reeling from COVID-related shutdowns, the budget outlook for cities and municipalities was still questionable… and we got in at a great price.  

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

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

And with the booming housing market, water infrastructure demand from new construction—the sector where MWA generates 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%). 

MWA now trades around its 10-year high. But it has plenty more room to run… 

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 to its customers. 

Mueller Water is an attractive play on the future of our infrastructure… with a 1.5% dividend yield to boot. And for now, it’s still trading at a great price. 

Genia Turanova, CFA, has more than two decades of Wall Street experience, and has served as an editor and chief investment strategist for multiple investment advisories. In 2019, Genia brought her proven investment record to Curzio Research as the lead analyst and editor behind Moneyflow Trader and Unlimited Income.