It’s hardly news that the population — globally and here in the U.S. — is growing rapidly.
By 2050, 438 million people will call themselves Americans — a 40% climb from 2010. By 2042, 9 billion humans will call this planet home. Such rapid population growth, as the Population Institute put it in a report last year, is both changing and challenging our world.
But alongside those challenges come a number of huge long-term investment opportunities in the businesses that cater to the growing populace’s most basic needs:
The most obvious challenge: feeding everyone. The number of households in the U.S. that are food-insecure already is at an all-time high — and that will only be exacerbated by a growing population. Plus, as it stands, one acre of natural habitat or farmland is converted to built-up space or highway for each person added to the U.S. population — that means we’ll have less land dedicated to growing food.
The solution is far from simple, but high-yielding crops and genetically modified food that can survive traveling long distances will be increasingly in demand.
Monsanto (NYSE:MON) — already the nation’s leader in terms of agriculture — is an obvious pick. The company has a great balance sheet now, along with countless innovations in the pipeline, including new high-yielding corn specimens and faster methods for developing elite seeds.
More broadly, agriculture is a $100 billion industry — and still growing. Thus, a sector-based exchange-traded fund like the Market Vectors Agribusiness ETF (NYSE:MOO) — which holds companies that derive at least 50% of their revenues from agriculture business — could be your best bet to profit off this trend.
MOO charges 0.53% in expenses, and its top five holdings include Monsanto, Potash, Syngenta (NYSE:SYT) — another company focused on increasing crop productivity — Deere (NYSE:DE) and Russian fertilizer company JSC Uralkali.
Water goes hand in hand with food. In the U.S., 85% of water goes toward food production — and as we said before, that’ll have to be ramped up in the future. Not to mention, there’s all the other ways humans need water, like personal consumption and sanitization. The country already has water shortages in some places — and that’s expected to worsen.
The largest water and wastewater company to bet on here in the states is American Water Works (NYSE:AWK), which provides water services to 15 million residential, commercial and industrial customers throughout North America. The need for more water plays right into AWK’s hand, and the company has been setting itself up, aggressively expanding through acquisitions. Better yet, it yields a decent 2.7% in dividends.
There’s a few other water companies to choose from. American States Water (NYSE:AWR) is a smaller company that serves California — a promising location consider it has several of the country’s fastest-growing cities and could thus see accelerated demand. Then there’s Mueller Water Products (NYSE:MWA), which focuses on water infrastructure.
If you want to spread out your play here, consider the Guggenehim S&P Global Water Index ETF (NYSE:CGW). It expands your reach beyond the U.S., and includes water companies like United Utilities Group (PINK:UUGRY), Pentair (NYSE:PNR) and American Water Works for 0.7% in expenses.
Another option is the PowerShares Water Resource Fund (NYSE:PHO), which provides heavy exposure to Pall Corp. (NYSE:PLL), Waters Corp. (NYSE:WAT) and Flowserve Corp. (NYSE:FLS), among others, for 0.62% in fees.
This is hardly rocket science — we need to fit more people in the same amount of space. And as we do that, we’ll have to build upward.
Last year, urban populations grew faster than suburban populations for the first time in decades. Plus, suburban areas inevitably will become more urbanized with time.
With that in mind, multifamily REITs — which operate apartments, condos and other multifamily communities — have the possibility to grow for years to come, even if some think they’ve peaked in the short-term. Best of all, REITs have to throw off 90% of their income to shareholders via dividends, making them attractive dividend plays in the long run.
A couple options in the space include AIMCO (NYSE:AIV) and BRE Properties (NYSE:BRE), which yield a respective 2.7% and 3.1% based on their past four payouts. The latter is a solid bet because of location; it has properties in Seattle — the seventh-fastest-growing city — and in the state of California, which has several cities in the top 10.
The iShares NAREIT Residential Plus Fund (NYSE:REZ) is a great investment for this trend. Its holdings include Equity Residential (NYSE:EQR), Avalon Bay (NYSE:AVB) and Essex Property Trust (NYSE:ESS). Avalon especially looks solid, as it has properties in the Washington, D.C., area, which has the nation’s top projected job growth through 2020. REZ yields a little more than 3% in dividends for a 0.48% fee.
As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.