Water Dragon Armor is a set of four items which can be obtained by attacking Lakes level 7 and higher with a Great or Elemental Dragon as part of the attack. Alternatively, they can be purchased from the shop, that cost real money, so I say it is a waste of money. Once you have obtained all four pieces, have Outpost 1's Dragon's Keep at level 8 or above, and have Aerial Combat at level 1+, you will be able to include the Water Dragon in your attacks.
As the items have a small chance of being found on each attack, many attacks will likely be necessary to find the set. Researching Aerial Combat, upgrading to higher level Dragon's Keeps and unlocking other Elemental Dragons will reduce the minimum time between attacks.