Infrastructure is the backbone of the global economy. As the economy grows, we need more capacity to support the free movement of goods and people. That's one of the reasons why the U.S. government is working on passing a massive $1 trillion infrastructure plan that would rebuild roads and bridges while funding new energy and technology initiatives.
This spending by governments and corporations on infrastructure will benefit companies focused on operating and developing these assets. Three infrastructure stocks that stand out as ideally positioned to profit in 2021 and beyond are Atlantica Sustainable Infrastructure (AY -1.38%), Brookfield Infrastructure (BIP -1.42%) (BIPC -1.53%), and Crown Castle (CCI -1.70%).
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Investing in the future of infrastructure
Atlantica Sustainable Infrastructure owns a globally diversified portfolio of infrastructure businesses. It operates renewable energy generating facilities, efficient natural gas and heating systems, electric transmission lines, and water desalinization plants. The company focuses on infrastructure that's crucial to a more sustainable world.
Atlantica primarily acquires existing infrastructure from developers or other third-party owners. These assets are already generating cash flow, which helps support the company's nearly 5%-yielding dividend. In addition, it will invest in select development projects, usually with strategic partners. That makes the company more of a financial facilitator of infrastructure expansion as it provides capital to companies that need the cash to build more infrastructure.
The company expects to spend $300 million per year on new infrastructure investments. When combined with the organic growth of its existing portfolio, Atlantica sees its cash flow per share expanding at a 5% to 8% annual rate through at least 2024. That should enable Atlantica to continue growing its dividend in the coming years.
Building global platforms for growth
Brookfield Infrastructure also operates a globally diversified infrastructure business. It owns utilities, energy midstream, transportation, and data infrastructure businesses. These businesses generate steady cash flow to support Brookfield's 3.6%-yielding dividend.
Brookfield has a multifaceted expansion strategy. It has a long history of acquiring infrastructure from companies and governments that need capital for other things. In addition, it will acquire companies that need better access to funding, which it can provide. These acquisitions enable it to build out expandable platforms, allowing Brookfield to keep growing.
The company is currently building out platforms in various segments, including electricity transmission in Brazil, residential infrastructure in North America, and data infrastructure like fiber networks, telecom towers, and data centers worldwide. It expects to deploy $5 billion on platform building over the next five years, which should support 5% to 9% annual dividend growth.
Focused on the U.S. telecom sector
Crown Castle is a real estate investment trust (REIT) focused on operating and developing U.S. communications infrastructure. The company owns cell towers, fiber networks, and small cells, leasing space on this infrastructure to telecommunications companies. That business model generates steady cash flow to support Crown Castle's 3.1%-yielding dividend.
Crown Castle sees a decades-long investment cycle ahead as the mobile industry shifts over to faster 5G networks. It believes that its steady investments to build new towers, fiber networks, and small cells will support 7% to 8% annual dividend growth.
Meanwhile, given its U.S.-focus, Crown Castle could benefit from additional infrastructure spending in the country. The currently discussed plan calls for $65 billion of funding to support broadband internet, which could benefit the company's fiber business. In addition, the government is looking to help fund this legislation by potentially auctioning off more 5G wireless spectrum. That could also benefit Crown Castle as telecom companies could accelerate their network deployments to use this additional capacity.
Great ways to play the long-term growth in infrastructure
We need more infrastructure to support a growing economy and a steadily rising global population. That should benefit companies focused on funding and developing new infrastructure like Atlantica, Brookfield, and Crown Castle. All three expect to grow at steady rates for the next several years. Combined with their attractive dividends, these factors position them to deliver compelling total returns for their investors in the coming years.
