These are boom times for construction. Towering cranes have become a fixture of city skylines. New housing developments are popping up left and right. And the U.S. government has committed to spending $1 trillion on infrastructure to fix aging roads and modernize public transportation.
For investors, all this building represents an opportunity. Construction projects are complicated and can take years to complete. There is a wide range of potential investments in companies that source raw materials, manufacture components, do the actual building, and manage projects from start to finish.
Construction companies, like many industrial stocks, are usually classified as slow and steady income stocks that are more likely to return money to shareholders than to double in value overnight. While it is true that most (but not all) of the companies listed below pay a dividend, there are some construction-related companies that are well positioned to grow faster than the economy as a whole, thanks to their exposure to long-term spending trends.
For those interested in investing in this growth, here are some standout stocks to choose from.
Top construction stocks to buy
Top construction stocks to buy
| Company | Market Cap | Specialties |
|---|---|---|
| Caterpillar (NYSE:CAT) | $176.1 billion | Construction and mining equipment. |
| United Rentals (NYSE:URI) | $45.2 billion | Equipment rentals for job sites. |
| Vulcan Materials (NYSE:VMC) | $34.2 billion | Aggregates, concrete, asphalt. |
| Nucor (NYSE:NUE) | $28.3 billion | Steel. |
| Fluor (NYSE:FLR) | $8.9 billion | Engineering and construction. |
| NV5 Global (NASDAQ:NVEE) | $1.3 billion | Engineering and project management. |
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Caterpillar
Caterpillar is the manufacturer behind some of the biggest vehicles on the planet. The company is the world's leading maker of construction and mining equipment, as well as diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives.
When construction demand is booming, Caterpillar has a lot of ways to win. The company sells heavy equipment for construction sites, and it also benefits from the corresponding boost in demand for raw materials that pushes mining companies to buy new equipment. Caterpillar also has a large financing arm, and the company makes billions annually on services and spare part sales.
It all adds up to a massive business. Caterpillar generated $67 billion in sales and $12 billion in operating free cash flow in 2023, allowing it to return $7.5 billion to shareholders via share repurchases and dividends -- and still end the year with a $7 billion cash balance. Investors currently get a dividend yield of about 1.5%, giving them several ways to profit.
United Rentals
When construction activity is brisk, a lot of small to mid-sized contractors need a lot more equipment than what they have on hand. United Rentals is the solution to that problem, offering a wide range of equipment from a network of more than 1,600 branches across North America and Europe.
United Rentals is North America's largest equipment rental company, but it still has just 15% of a highly fragmented market. The company benefits from renting to a broad range of markets, including construction and utilities, helping it generate steady results regardless of fluctuations in demand from individual sectors. Over the past decade, United Rentals has increased revenue at a compound annualized rate of 24% and earnings per share at a rate of 20%.
The company does not pay a dividend, preferring instead to return excess cash to investors via share buybacks. United Rentals has reduced its share count by 33% over the past decade, meaning that each share an investor owns is worth more of the overall company now than it would have a decade ago.
Vulcan Materials
Vulcan is the country's largest producer of construction aggregates, primarily crushed stone, sand, and gravel, as well as a major producer of construction materials including asphalt and concrete.
This is a business where scale really matters. It isn't cost-effective to ship sand and stone thousands of miles to a job site. Vulcan’s network of more than 400 aggregates facilities, as well as 70 asphalt facilities and 140 concrete sites, are spread across the U.S., giving it nationwide exposure to construction activity and road building.
There is a lot of money to be made hauling rocks. Vulcan made a gross profit of $1.9 billion on sales of $7.8 billion in 2023, shipping more than 234 tons of product. Vulcan shares currently provide an annual yield of about 0.8%.
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Nucor
Steel is the basic building block of a lot of heavy construction, and few are more efficient at making steel than Nucor. In the 1960s, the company revolutionized the steel manufacturing process, replacing the huge, inefficient blast furnaces traditionally used to blend metals with a cheaper process that melts scrap into usable steel bars.
Today, Nucor ranks among the largest U.S. steel manufacturers and has a reputation as one of the few that can remain profitable when demand wanes.
In 2023, Nucor earned $4.9 billion on sales of $34.7 billion. The company has also paid a dividend for 196 straight quarters. Investors today get a yield of 1.8% and should also benefit from Nucor's push to repurchase billions of dollars worth of shares annually.
The steel industry has been the source of a lot of investor heartbreak over the years, with the industry forced to restructure under pressure from lower-cost foreign competition. There's little Nucor can do about changes in demand for steel, but the company has a proven formula to keep costs low that has made investing in steel a good option for the first time in a generation.
Fluor
Fluor is a century-old engineering and construction company that has grown from humble beginnings as a Texas-based builder of oil rigs into a multinational giant. Fluor offers a range of services, from project design and management all the way through to actual construction.
Buying into Fluor provides investors with exposure to domestic and international commercial and private sector construction, emphasizing megaprojects such as New York State’s replacement of the Tappan Zee Bridge.
Fluor generated over $15 billion in sales last year and ended 2023 with a backlog of $29 billion more in future business. The company does not currently pay a dividend, but it has in the past.
NV5 Global
Think of NV5 Global as a scaled-down version of Fluor. NV5 is focused on the industrial engineering side of the business, providing professional and technical consulting services for government and business clients.
These services can include everything from environment impact assessments to code compliance to civil engineering and permit management. The company also manages projects, helping to make sure buildings are finished on schedule and as designed.
NV5 is smaller than some of its rivals, but that also gives it more growth-stock potential as it races to expand and take share. The company has more than doubled revenue over the past five years, from $420 million in 2018 to $861 million last year. However like many growth-focused companies, NV5 is investing its cash in expansion, and it does not currently pay a dividend.
Construction ETFs
Buy a construction basket instead
For those interested in construction stocks but who prefer not to buy individual equities, the Global X U.S. Infrastructure Development (BATS:PAVE) ETF provides exposure to a portfolio of construction companies, including many of the names listed above.
Related investing topics
Should you invest?
Are construction stocks right for you?
This list consists of a lot of different companies doing a lot of different things, and, indeed, construction is a broad sector. But all these companies share exposure to commodity prices and business cycles.
It’s hard to predict the future, but construction looks poised for an extended upswing. Between the need for more housing and the government’s ambitious infrastructure renewal program, there should be a lot of demand for construction equipment and services in the years to come.
For those looking for some stability to balance out higher-risk growth stocks, the construction sector provides solid options that can build a strong foundation for your portfolio.
