Discussions about a phase-four federal aid package to help the country recover from the impacts of the COVID-19 pandemic have included funding for programs to upgrade America's roads, bridges, airports, and other critical infrastructure. But whether or not that funding occurs now, there will be a need for investments in this sector at some point.
Brookfield Infrastructure Corporation (BIPC -0.47%), Nucor Corp. (NUE 1.81%), and NextEra Energy Inc. (NEE 0.51%) are three companies that have profitable, and growing, businesses even without such a federal program. All three have been investing for the future, and owning shares now allows an investor to benefit from those investments, in addition to collecting dividend income along the away.
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Recycling assets
Brookfield Infrastructure Corporation is the new corporate entity created by Brookfield Infrastructure Partners (BIP -1.33%). This entity now allows investors to participate in Brookfield's business without the potential tax complications that can come with a limited partnership. The share price and dividends of the corporation mirror the price and distributions from the partnership.
The company invests globally in assets, including data infrastructure, utilities and energy transmission, and transportation, including toll roads, ports, and railroads. These assets provide stable cash flow tied to their use, and Brookfield opportunistically recycles them at a profit to invest in new, higher-return assets. This capital allocation formula has been successful, and the company reported a 17% internal rate of return in 2019 on $1.5 billion of mature assets it sold.
It experienced 9% organic growth last year, at the top end of the 6% to 9% long-term target range, while increasing shareholder distributions by 7% -- the 11th consecutive year of increases. This should continue, as 95% of cash flows were regulated or contracted as of June 30, 2019. As global infrastructure growth continues, Brookfield will be an investor that shareholders can ride along with.
Renewable energy
NextEra Energy is the largest electric utility in the country with Florida Power & Light and Gulf Power, as well as the global leader in the generation of electricity by wind and solar power under its Energy Resources unit. The company is the largest global utility by market cap and in a position to continue expanding its renewable assets.
It has a backlog of renewable projects that represents almost 50% of its current electricity generation capacity as of January, 2020. According to the International Renewable Energy Agency, 72% of net global capacity expansion in 2019 was from renewables, and NextEra is playing an important role.
NextEra is a way to share in the benefits of the expanding investments in energy infrastructure, particularly wind and solar. A three-year chart shows that even with the large market cap, it has strong growth, as well as the continued increase in dividends paid to shareholders.
Structural steel
Nucor, the largest steel producer in the U.S. and North America's largest recycler, has a diversified mix of steel and steel products that almost all play a role in infrastructure projects. Its steel mill production consists of 55% plate, bar, and structural products -- all of which are heavily used for projects like bridges, ships, and highways, as well as the equipment used for those projects. The remaining sheet products are also used for roofing, siding, and myriads of consumer products.
Its building products segment is a downstream business using the steel mill production for metal buildings and related components, tubular products, and bar. The company says it tracks, and supplies, 24 different end-use markets. Any infrastructure investments would heavily use Nucor's products from more than just one of it segments.
But Nucor has been successfully growing without a big federal infrastructure program, too. It has about $3.5 billion in growth projects coming on line through 2022 and has the cash flow to pay for that capital along with a solid base dividend, which it has increased for 47 straight years.
Solid businesses
Any increase in infrastructure spending will help boost all of the above businesses. But each of those businesses has also been prospering without an influx of growth projects.
A strong economy certainly helps these companies, and a recession will no doubt impact the stock prices in the short term. But each one pays shareholders a nice dividend throughout the business cycle, and with the potential for more infrastructure spending at the federal level, there is even more reason to buy these stocks now.
