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3 Leading Infrastructure Stocks to Buy in 2021 and Beyond

By Neha Chamaria – Sep 30, 2021 at 7:25AM

Key Points

  • A $1 trillion infrastructure bill could pass anytime soon.
  • The bill could send stocks already benefitting from rising construction spending to new highs.
  • Don't overlook the potential in top steel, clean energy, and technology stocks.

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These top infrastructure stocks are making boatloads of money even before an infrastructure bill is passed.

There's been lots of hype around infrastructure stocks ever since Joe Biden was elected president. Over the months, though, the Biden administration has put forth sweeping spending plans, proving its seriousness about rebuilding America's infrastructure. So you're not wrong to have been optimistic about infrastructure stocks.

In fact, a historical $1 trillion infrastructure bill looks closer to reality now than ever. Even before it's passed, construction spending in the U.S. has risen steadily in recent months to hit record highs as both federal and local governments are loosening their purse strings, especially as the economy rebounds from the COVID-19 pandemic. Some companies are, therefore, already making a lot of money, and higher federal spending under a bill could prove to be their biggest growth catalyst yet. You wouldn't regret owning a piece of these companies, so here are three such top infrastructure stocks to buy and hold in 2021 and beyond.

The top stock to bet on Biden's massive clean energy goals

Biden's infrastructure bill places strong emphasis on clean energy. Among other things, it contains proposals to spend $105 billion on modernizing transportation, including replacing thousands of transit vehicles with zero-emission vehicles, $7.5 billion on electric-vehicle charging infrastructure, $5 billion on zero- and low-emission school buses, and $60 billion on clean energy transmission as Biden aspires for 100% carbon-free electricity by 2025. Solar is a top priority within clean energy.

One stock poised to be among the biggest beneficiaries of Biden's clean energy goals is NextEra Energy (NEE 0.44%). NextEra not only owns the largest regulated electric utility in the U.S., but is also the world's largest producer of solar and wind energy.

A worker inspecting solar panels in a factory.

Image source: Getty Images.

NextEra Energy's decades of renewables experience, size and scale, solid balance sheet, and strong customer and supply chain relationships put it at the forefront of energy transition as the U.S. strives to build out its clean energy infrastructure and decarbonize. Green hydrogen is also a compelling opportunity that NextEra Energy is exploring.

NextEra's clean energy arm already has a contracted backlog of nearly 16.7 gigawatts, which means the company is already set for strong growth in the near term. NextEra Energy expects adjusted earnings per share to grow 6%-8% between 2021 and 2023, cash flows to grow in line with earnings, and dividends to grow 10% annually until next year at least.

NextEra Energy's dividend growth, in fact, is one big reason why it's such an attractive energy and infrastructure stock to own. It has grown dividends at a solid compound annual rate of 9.6% between 2005 and 2020, and that's hugely helped boost shareholder returns. The trend should continue, which means NextEra Energy is among the few stocks that could be worth $1 trillion by 2035.

NEE Chart

NEE data by YCharts

A technology stock betting big on infrastructure

You may be surprised to find a technology company on a list of infrastructure stocks, but Autodesk's (ADSK -2.81%) computer-aided design (CAD) software, especially AutoCAD, has been widely used by architects and engineers for years, and that's unlikely to change.

Autodesk is a 3D design and engineering company with three broad product platforms:

  • AutoCAD
  • Architecture, engineering, construction (AEC) software
  • Manufacturing software

The COVID-19 pandemic has spurred a worldwide digital transformation, and that's hugely helping Autodesk. For example, projects from subscribers of its building information modeling software, BIM Collaborate Pro, have more  than doubled since the pandemic. BIM Collaborate Pro is a key AEC product. Likewise, subscriptions for its manufacturing software, Fusion 360, have grown at a compound annual rate of 53% in the past three years thanks to the post-pandemic surge.

During the first half of fiscal 2022, Autodesk's:

  • Total billings jumped 19% to $2.1 billion.
  • Free cash flow surged 35% to $500 million.
  • Gross margin hit 91%.

For the full year, Autodesk is projecting:

  • 18%-20% growth in billings to $4.9 billion at the midpoint.
  • 15%-16% growth in revenue to $4.4 billion at the midpoint. 
  • Free cash flows worth at least $1.5 billion.

Combine these stunning growth numbers with AEC's aggressive ongoing expansion in rail, road, and water infrastructure -- also priority areas in Biden's infrastructure spending plan -- and Autodesk looks like a surefire winner in the making.

This Dividend Aristocrat is unbelievably cheap

Nucor (NUE 3.32%) is a no-brainer infrastructure stock to buy ahead of an infrastructure bill for one simple reason: Nucor is the largest manufacturer of steel, an indispensable raw material used in nearly all kinds of construction, and it's already making record profits.

Nucor reported two straight quarters of record earnings, but it isn't done just yet: It expects to deliver record numbers yet again for its third quarter in October, projecting earnings to jump almost 46% over its record Q2 EPS. With surging global demand for steel sending prices of U.S. hot-rolled coil soaring, Nucor is making the most of the incremental cash flows.

In just the past couple of months, Nucor acquired the insulated metal panels business from Cornerstone Building Brands for $1 billion and steel racking manufacturer Hannibal Industries for $370 million. Nucor now also plans to build a new sheet mill plant for $2.7 billion.

NUE PE Ratio Chart

NUE PE Ratio data by YCharts

There are two other big reasons why I really like Nucor. It is also the largest steel recycler in North America, and produces the bulk of steel from scrap recycled in its own backyard. That's an incredible competitive advantage to have from a cost point of view. Also, Nucor has increased dividends every year for 48 consecutive years and is on its way to becoming a Dividend King.

Here's the real deal: Nucor's net income is hitting record highs, yet the stock is trading at a price-to-earnings (P/E) ratio of barely 10.3 times versus its five-year average P/E of 17 times. With Nucor shares dropping 21% from 52-week highs in August, it's a golden opportunity to buy this infrastructure stock. 

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Autodesk. The Motley Fool recommends NextEra Energy. The Motley Fool has a disclosure policy.

Stocks Mentioned

Nucor Stock Quote
Nucor
NUE
$154.20 (3.32%) $4.95
NextEra Energy Stock Quote
NextEra Energy
NEE
$85.20 (0.44%) $0.37
Autodesk Stock Quote
Autodesk
ADSK
$201.11 (-2.81%) $-5.82
Cornerstone Building Brands Stock Quote
Cornerstone Building Brands
CNR

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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