According to data by Johns Hopkins, new COVID-19 cases in China reached a record high of 447,104 between Feb. 28 and March 6. The numbers have come down since then, but the seven-day average for daily new COVID-19 cases in China remains higher than at any point in 2020.
In the U.S., fears of a COVID-19 omicron BA.2 subvariant are rising, although a surge remains unlikely for now.
Investors who are looking for companies that can be long-term winners even if COVID-19 cases rise have come to the right place. Here's what makes the iShares Global Infrastructure ETF (IGF 0.16%), American Water Works (AWK +1.22%), and Kinder Morgan (KMI +0.36%) three great dividend investments worth considering now.
Image source: Getty Images.
There's no let-up in demand for investment in infrastructure
Lee Samaha (iShares Global Infrastructure ETF): While the pandemic and geopolitical events may delay investment in many industries in the near term, there's no denying the megatrend toward global investment in infrastructure. In the developed world, there's an urgent need to replace and modernize existing infrastructure, a fact emphasized by the infrastructure bill in the U.S. Meanwhile, the developing world needs investment in infrastructure to support economic growth.
Whether it's airports, ports, transportation infrastructure, utilities, energy infrastructure, water and wastewater treatment, or even parks and schools, it's a sure thing that global spending on infrastructure will go up for many years to come.
That's where the iShares Global Infrastructure ETF (exchange-traded fund) comes into play. I particularly like this ETF is because it appears to do what it says it will do. In other words, focus on genuine infrastructure companies like energy pipeline companies, airport operators, and toll road providers. As such, the managers of the ETF have avoided the temptation to pick winners in the infrastructure sector or invest in companies that aren't core infrastructural businesses.
The iShares Global Infrastructure ETF offers you a chance to invest in global infrastructure while enjoying a 2.7% yield while you wait. If you're going to play the theme, this ETF is the best way to get direct exposure.
Bathe your portfolio with a boring and basic source of passive income
Scott Levine (American Water Works): Feeling unsettled at learning that China is instituting lockdowns in various cities to stem the spread of the new COVID-19 variant? You're not alone. For millions of people, daily activities are resuming the feel they had prior to the pandemic's onset; however, the threat of a new COVID-19 variant can change that in a flash. And with it, market volatility would surely ensue. For those concerned about the prospect of wild market swings, fortifying their portfolios with a conservative dividend stock like American Water Works is a strong move to make.
Providing water and wastewater services to more than 14 million people in 24 states, American Water Works primarily operates in regulated markets. In each of the past three years, for example, the company has generated 86% of its operating revenue from its businesses in regulated markets. Operating in this way affords the company clear insight into future cash flows, allowing it to plan accordingly for acquisitions of smaller municipal-run water utilities as well as the replacement and upgrading of aging infrastructure.
Granted, the eyes of high-yield dividend seekers may not be lighting up when they see the 1.54% forward dividend yield that American Water Works' stock offers, but management's commitment to rewarding shareholders makes the stock worth wading into. From 2016 to 2021, management has raised the dividend at a 10% compound annual growth rate. Looking ahead, investors will find that management is expecting to grow the payout at a similar pace, projecting to increase the dividend at a 7% to 10% compound annual growth rate from 2022 to 2026.
Think these dividend raises are going to land the company in hot water? Think again. On American Water Works' Q3 2021 conference call, CEO and CFO Susan Hardwick stated that management is "narrowing our long-term payout target range to 55% to 60% which will allow us to fund our significant regulated investment plan, fund our dividend growth strategy, and maintain a healthy balance sheet."
NYSE: AWK
Key Data Points
A stable business with a high yield
Daniel Foelber (Kinder Morgan): Like buying shares of an ETF or investing in American Water Works, pipeline giant Kinder Morgan is about as boring of a company as you can find. However, investing isn't a beauty contest. Rather, it's about finding quality businesses that are undervalued or have growth potential. And while Kinder Morgan may not have a lot of growth, there's reason to believe its business is undervalued even after the stock's 20% year-to-date run-up.
Kinder Morgan is one of the largest energy infrastructure companies in North America. Its business is tied to stable long-term take-or-pay and fixed-fee contracts that protect it from volatile swings in oil and natural gas prices, but also limit the upside potential in case oil and gas prices skyrocket. This dynamic makes Kinder Morgan a relatively safe energy stock that performed much better in 2020 (when oil and gas prices were crashing) compared to other oil and gas companies. But it also means Kinder Morgan is probably going to underperform the oil and gas industry when prices are surging (like in 2022).
Despite its short- to mid-term stability, Kinder Morgan depends on the long-term relevance of natural gas, and to a lesser extent oil so that it gets favorable terms when it comes time to renew contracts. Therefore, Kinder Morgan benefits from higher demand for domestic consumption, as well as export potential.
Given the geopolitical risks that are unfolding, it is safe to say that much of the world is now more interested than ever in importing liquefied natural gas (LNG) from the U.S. in order to lower dependence on neighboring land-based pipelines. The need for higher LNG export is a boon for Kinder Morgan's business. So there's certainly some upside there.
In the meantime, Kinder Morgan has proven that it can generate stable cash flows in good times and bad, which supports a growing dividend. With a yield of 5.9%, Kinder Morgan is too good of a value to pass up.
