Dedicating time to identifying and following investing trends can be a tricky business. It wasn't long ago that 3D printing and ESG-focused stocks were all the rage. Unfortunately, many tickers associated with those categories have failed to prosper.
But that's not to say that recognizing current trends can't be a valuable endeavor. Inflation, infrastructure development, and passive income generation are big topics on investors' radars these days. The critical issue, though, is finding quality stocks that have exposure to these trends. And that's why Chevron (CVX -2.33%), American Water Works (AWK 2.01%), and Brookfield Infrastructure (BIP 3.50%) (BIPC 1.09%) are smart choices right now.
1. Passive income generation
With the fear of an economic downturn weighing heavily on their minds, many investors are paying renewed interest to dividend stocks as a way to bolster their portfolios. It's hardly surprising. Getting paid for doing nothing is an enticing scenario, even when the economy is strong. To tap into this trend, income investors will want to consider energizing their portfolios with Chevron.
An oil supermajor, Chevron is one of the leading oil dividend stocks out there. But it's not simply its attractiveness among stocks in the oil patch that warrants consideration -- the stock is also a Dividend Aristocrat, having consistently raised its distribution for 35 years. Earning a place among this noble group is no easy feat, and dividend investors often favor Dividend Aristocrats for their proven ability to reward shareholders steadfastly. In addition, Chevron is one of the largest holdings in Berkshire Hathaway's portfolio.
With a forward dividend yield of 3.7%, Chevron also represents a Dividend Aristocrat with Warren Buffett's approval seal. That's a heady combination, which investors would be wise to consider.
2. Safeguarding against inflation
While pundits debate whether we've entered a recession or not, the fact that inflation is soaring is undebatable. Rising prices are acutely affecting individuals' wallets, and they're also adversely impacting the financials of companies across a wide swath of industries. This is naturally leading investors toward businesses that are resilient in the face of rising prices -- businesses like American Water Works.
A company dealing in water and wastewater service, shares of American Water Works have climbed 661%, while the S&P 500 has risen 203%.
American Water Works is extremely resilient when it comes to inflation. The company primarily deals in the regulated markets -- this provided 86% of its operating revenue in 2021 -- so it has good foresight into future cash flows, unlike other businesses that are more sensitive to upswings in prices.
Rising energy prices may deter people from extended road trips, but it's highly unlikely that anyone's shouting, "Let's skip our showers. We need to save on the water bill." This implies that the largest publicly traded water utility, American Water Works, is a keen opportunity right now, especially considering its stock's price tag. Shares are currently trading at 21.9 times earnings, representing a discount to its five-year average P/E of 35.5 and the 29.9 earnings multiple of the Dow Jones Utility Average.
3. Interest in infrastructure
Investors have been spending an increasing amount of time investigating infrastructure stocks since President Biden signed the $1.2 trillion Infrastructure Investment and Jobs Act last November. Moreover, interest in infrastructure-related stocks has grown even more intense over the past couple of weeks as the Inflation Reduction Act has gained momentum in Congress.
Many tickers have ties to infrastructure, but one especially compelling name is Brookfield Infrastructure. For one thing, it taps into the passive income trend, offering a high-yield dividend of 3.5% for shares of the Brookfield Infrastructure Partners ticker. Investors can also choose Brookfield Infrastructure Corporation's stock, which is the same business but is organized under a traditional corporate structure and has a lower yield of 3%. Both tickers offer the same quarterly distribution per unit and share.
Brookfield Infrastructure operates assets on five continents, but it's the ones in the U.S. that stand to benefit in particular. The infrastructure legislation signed in November includes $89.9 billion in funding to improve America's transportation infrastructure. Brookfield Infrastructure also operates more than 20,000 miles of rail and about 2,400 miles of toll roads. The company also stands to benefit from large-scale investments -- about $65 billion -- in high-speed internet.
Don't buck these trends
Investing in the latest trends doesn't always end well. Just ask some early marijuana investors who've seen their stocks go up in smoke. But it makes sense to want to generate strong passive income, guard against inflation, and benefit from infrastructure spending. So while the most conservative-minded investors may opt for American Water Works to take on the lowest degree of risk, Brookfield Infrastructure and Chevron offer two-for-one deals -- they're sound dividend stocks that also afford varying degrees of infrastructure exposure.