Editor’s Note: Nathan’s article today makes the case that water is the world’s most critical commodity — and that essential demand, by definition, never has a down-cycle. If that kind of income reliability draws you, Nathan has also written up the one income stock he’d own if he could own only one: a company that has paid its owners every month without exception since going public in 2007 and has never once reduced that payment. The name and ticker are on page one, free, no card. Get the report →

My backyard rain gauge registered 0.05% inches last weekend. That would hardly be considered newsworthy… if we weren’t in a severe drought. Maybe you can relate.

Counties in 42 U.S. states (about half the nation’s surface area) are currently experiencing drought conditions… many seeing “exceptional” rain deficits over the past year. It’s times like this when you really appreciate water as a scarce natural resource.

It doesn’t trade on any exchange. You won’t find price quotes for it on your favorite financial site. Heck, it’s barely talked about in investment circles. Certainly not like gold or oil. Yet, good old H2O is undeniably the world’s most critical commodity.

It touches every one of the Earth’s 8 billion inhabitants daily, with an unwavering global demand that stands to increase year after year.

According to the World Health Organization, roughly 2 billion people lack basic access to clean drinking water. The rest of us usually take it for granted — at least until the faucets stop flowing. That’s why you see people in a mad scramble to stock up on bottled water whenever a storm is approaching.

It’s a well-known fact that 97% of the world’s water is too salty to drink. But of the remaining 3% that is fresh, less than 1% is readily accessible (most is locked up in frozen polar ice caps). Abundant though it may seem, this most precious of natural resources isn’t quite as plentiful as you think.

The hard truth is, many of the world’s most critical water aquifers, reservoirs and river basins are drying up.

To make matters worse, the U.S. loses 6 billion gallons of treated water a day to leaky, corroded pipes? If that’s just what is spilled, then you can imagine how much we actually use. According to the U.S. Geological Survey, intake plants across the country withdraw 350 billion gallons a day nationally for treatment and distribution.

The City of Chicago alone pumps out a billion gallons every 24 hours.

Between showers, dishwashers and other household uses, the average person goes through 100 gallons a day. But residential needs only account for about 12% of total consumption. Coal mines, paper mills, petrochemical plants and other industrial operations also require billions of gallons each year.

Then there’s crop irrigation. Worldwide, it’s estimated that two-thirds of the world’s freshwater is channeled toward agricultural uses. It takes roughly 1,000 tons of water to produce just one ton of grain. To keep land arable, farmers have dug millions of irrigation wells and are pumping at rates that are simply unsustainable, which is why groundwater aquifers are being slowly depleted.

Of course, it’s not just rural areas that are thirsty. Hyperscale data centers can use up to 5 million gallons a day… even more in the peak summer heat.

As the world’s population grows, we are beginning to see an ever greater strain on existing water supplies.

We don’t typically think of water in terms of supply and demand. But consider the case of Lake Mead, which was created in 1937 by the construction of Hoover Dam. This reservoir gives life to the parched Las Vegas desert. But over the past decade, more water has consistently been withdrawn than deposited — creating a deficit of 1.2 million acre-feet annually.

As we speak, water levels have fallen to just 26% of capacity.

Elsewhere, Florida’s Lake Okeechobee became so dry that 12,000 acres of former lakebed caught fire a few years ago. States like Arizona and California have been forced to convene drought summits to come up with viable solutions.

Of course, chronic water shortages are by no means limited to the United States.

The surface area of Africa’s Lake Chad (once the world’s sixth-largest freshwater body) has shrunk by 95% since 1963. Big storms sometimes bring a reprieve, but they don’t change the fact that long-range weather models point to searing heat and bone-dry conditions in many parts of the world in the coming decade.

The fact is, we need water for recreation, for electricity, for irrigation, and for residential uses — and there just isn’t enough to go around. All of this leads to one inescapable conclusion: this water deficit is likely to get worse, not better.

My intent here isn’t to scare you with alarming statistics. Quite the opposite. There are big gains to be had for companies whose products and services can help alleviate the problem.

I’m reminded of the classic 1980s film Brewster’s Millions, when the lead character was approached with an opportunity to solve the world’s water shortages by carving out a giant iceberg and then floating it back home where it could be melted down.

We won’t be talking about anything that outlandish today.

Still, desalination and purification plants must be built. Smart meters and other distribution infrastructure must be upgraded and expanded. And that’s just the start

Thankfully, PowerShares has created a novel ETF that taps (no pun intended) into all these areas… and more.

I’m talking about Invesco Global Water (NYSE: PIO)

Launched back in the summer of 2007, this fund was built solely as a vehicle to invest in water-related enterprises. Specifically, it mirrors the Nasdaq OMX Global Water Index, which tracks the performance of companies engaged in the conservation, purification and distribution of water to homes, businesses, and industries.

The fund has $260 million in assets deployed among 40 global players. About half is invested in industrial water equipment manufacturers. That includes Kurita Water Industries, a Japanese developer of treatment chemicals, and Idex (NYSE: IEX), which makes flow pumps and meters for water treatment plants.

The other 50% of the portfolio is dedicated mostly to regulated water utilities, which enjoy steady demand and are generally free from competition. There’s a sizeable stake in United Utilities (OTC: UUGRY), the largest water provider in the United Kingdom. And American Water Works (NYSE: AWK) – which has boosted dividends for 19 consecutive years.

Geographically, about half of the fund’s assets are invested in U.S. firms, with the remainder spread out among Japan (12%), Brazil (10%), Switzerland (8%) and several other countries. From a style perspective, the portfolio straddles the border between mid- and large-cap growth, although the utilities lean to the value side of the spectrum.

The annual expense ratio is fixed at 0.75%, which is reasonable, especially since many of these holdings trade only on foreign exchanges.

Investing in a narrow sector fund always involves an added bit of risk. But I can’t envision a future where the purification and distribution of clean water suddenly become unimportant. Keep in mind, The world’s population is growing by about 70 million people per year, which spells rising demand for food and electricity — both of which require huge amounts of water.

Unlike other commodities, there is no down-cycle for water. Existing infrastructure is already being stretched thin, and billions will be spent on new plants and equipment to keep up. These companies will be cashing the checks.

The fund has chalked up average annual gains of 8.9% over the last decade and should continue to perform well.

If what draws you to water is the same thing that draws me to income investing — the idea that certain kinds of demand simply never go away — then there is a company I would like to tell you about. I have owned it since November 2015. It has paid me every month without exception, added a bonus payment four times a year, and has never once cut the monthly dividend since going public in 2007, not even in 2008. I have written it up with the name and ticker on the first page and the honest argument against it right beside them. It is yours free, no card, no login. Get the report →