Could Industrial Autonomous Vehicles Outpace Autonomous Cars By 2025?
Four investors share their thoughts.
Infrastructure is essential to transport and store energy, water, freight, passengers, and data. It's the physical backbone of the global economy, so a well-maintained infrastructure is vital to the health and continued growth of the economy.
Infrastructure is costly to build and maintain. The U.S. alone needs to invest an estimated $2.6 trillion by 2030 to bring its infrastructure up to date. The U.S. Congress took a big step in that direction in 2021 by passing a $1.2 trillion infrastructure bill. The legislation included money for highway repairs, bridge reconstruction, and port, airport, and transit system upgrades.
Globally, the need for infrastructure investment is even greater. Swiss Re estimates that the investment required through 2040 to rebuild and expand the world's infrastructure is more than $80 trillion.
Governments can't afford that expense by themselves, which is leading them to increasingly collaborate with companies in the private sector. An infrastructure company may own, operate, build, maintain, or expand infrastructure systems. The different types include:
Below are three top infrastructure companies that have long histories of creating shareholder value and are well-positioned to benefit from the sector's growth.
Below are five top infrastructure companies that have long histories of creating shareholder value and are well-positioned to benefit from the growth in infrastructure spending in the coming years.
Brookfield Infrastructure (NYSE:BIP)(NYSE:BIPC) is a major beneficiary of the trend in government entities increasingly transferring ownership of infrastructure assets to the private sector to fund new investment. It’s a leader in owning, operating, and acquiring transportation, midstream energy, utility, and data infrastructure. The company holds a diversified, global portfolio of infrastructure companies.
Its strategy has paid off. Brookfield Infrastructure has a long history of increasing its dividend payments and outperforming the S&P 500 (SNPINDEX:^GSPC). The company expects to boost its dividend by 5% to 9% annually over the long term, making it likely to continue paying a higher-than-average dividend yield.
Enbridge (NYSE:ENB) is one of the leading energy infrastructure companies in North America. It operates oil and gas pipelines, other midstream assets, and natural gas utilities. The company also has a sizable renewable energy business.
Enbridge has increased its dividend for more than 25 consecutive years. Despite the shift toward cleaner alternative energy sources, it’s still growing and estimates it can increase its annual cash flow per share by 5% to 7% through 2024. Because of that, the company is well-positioned to continue increasing its high-yielding dividend.
Crown Castle (NYSE:CCI) is one of the largest infrastructure-focused real estate investment trusts (REITs). The company enables mobile data and voice transmissions by operating large communications towers in the U.S. It also owns a fiber-optic cable telecommunications network and a growing portfolio of small cell wireless sites. This infrastructure is crucial for enabling 5G networks to expand across the country.
This infrastructure REIT has steadily increased both its cash flow and its dividend. Crown Castle sees a decade-long investment opportunity ahead supporting the expansion of 5G. The REIT believes this expansion should support a 7% to 8% annual growth in its dividend.
Caterpillar (NYSE:CAT) is a leading global manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. That makes it a prime beneficiary of increasing global infrastructure spending.
The industrial company has a long history of creating value for shareholders. Caterpillar has increased its dividend for more than 25 years, qualifying it as a Dividend Aristocrat. This trend should continue, given the growing need for equipment to build and maintain global infrastructure.
Fluor (NYSE:FLR) is a leading global provider of engineering, procurement, and construction services. It focuses on three markets:
Flour’s wide range of capabilities makes it a key beneficiary of increased global infrastructure spending. As a leader in engineering and construction, it will play a key role in building infrastructure projects in the coming years.
For investors who prefer not to choose individual stocks, buying shares in exchange-traded funds (ETFs) enables you to make diversified, directional bets on stock market sectors and investing themes. Investors have several infrastructure-focused ETF options.
The three infrastructure ETFs listed below concentrate on different aspects of the infrastructure industry. This variety, combined with their large asset bases -- these funds are the top three infrastructure ETFs by assets under management -- makes any of these ETFs great options for gaining portfolio exposure to the infrastructure investing megatrend.
The iShares Global Infrastructure ETF (NASDAQ:IGF) holds stocks in more than 75 infrastructure companies that are primarily focused on serving developed countries. This infrastructure ETF offers targeted global access to companies that provide transportation, communication, water, and electricity services.
The Global X US Infrastructure Development ETF (NYSEMKT:PAVE) holds stocks in more than 100 infrastructure companies, all of which are poised to benefit from an increase in U.S. infrastructure investment spending. The fund holds the stocks of raw materials producers, heavy equipment makers, and engineering and construction companies.
The FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEMKT:NFRA) is an ETF that holds almost 250 infrastructure stocks. The fund provides global exposure to the energy, utilities, communications, and transportation sectors.
Here are some specific types of infrastructure stocks and the companies providing the best exposure to these parts of the infrastructure industry.
Dozens of electric utility companies focus on generating electricity and distributing it to customers. They also collectively maintain the infrastructure comprising the nation's electrical grid to ensure its reliability. One of the leading U.S. electric utilities is NextEra Energy (NYSE:NEE).
Many infrastructure companies operate natural gas infrastructure, which includes pipelines, processing plants, storage facilities, and LNG export terminals. Among the leaders are Enbridge and Kinder Morgan (NYSE:KMI).
Road infrastructure companies operate toll roads under concession agreements with governments. They collect tolls to maintain the roadways and expand the roads as traffic volumes increase. Brookfield Infrastructure is a leader in this sector.
Technology infrastructure includes communications towers, fiber-optic cables, and data centers. Some of the leading technology infrastructure companies are Crown Castle and American Tower (NYSE:AMT), both of which are infrastructure REITs.
Pipelines, distribution systems, desalination plants, and wastewater and sewage treatment facilities are all considered water infrastructure. One of the top water stocks is American Water Works (NYSE:AWK).
A growing number of infrastructure companies are developing, owning, and operating emissions-free energy sources such as wind, solar energy, hydrogen, hydropower, and biofuels. Among the sector's leaders are NextEra Energy, Brookfield Renewable (NYSE:BEP)(NYSE:BEPC), and Atlantica Sustainable Infrastructure (NASDAQ:AY).
The global economy requires trillions of dollars of spending in the coming decades to rebuild aging infrastructure and construct new assets to meet the needs of steadily rising populations. With such immense needs and so many ways to invest, adding infrastructure stocks or ETFs to your investment portfolio is a straightforward way to profit from this megatrend.
Four investors share their thoughts.
These investments seem pretty vulnerable right now.
These names have an average yield of 3.6%.
These dividend stocks offer a nice blend of growth and income.
This richly valued stock may come at a high price, but the value is there.
Most people see it as a midstream company. But its focus is increasingly on clean energy.
Industrial powerhouse Eaton has been building a new business from the ground up, and it's getting closer to a big payoff.
The energy-infrastructure giant continues to generate steady results.
KMI earnings call for the period ending December 31, 2021.
These companies' exposure to infrastructure spending gives them the potential for surprises on earnings in the coming years.