Admin September 17, 2024
The Infrastructure Investment and Jobs Act (IIJA) and other federal initiatives have been a crucial boost for the infrastructure sector, helping it thrive even as other parts of the construction industry slow down. In 2024, $1.8 trillion in federal funding is flowing into the economy through grants, loans, and tax credits, according to S&P Global.
Investors looking to capitalize on this growth could consider investing in fundamentally sound ETFs such as Global X U.S. Infrastructure Development ETF (PAVE), iShares Global Infrastructure ETF (IGF), and iShares U.S. Infrastructure ETF (IFRA).
According to White House data analyzed by CNBC, the largest portion of IIJA funding is directed toward road and bridge projects, followed by rail, broadband, power, and water projects. To date, improvements have been made on 165,000 miles of roads, and more than 9,400 bridges are currently undergoing repairs.
Yet, we’re only halfway through the IIJA’s five-year span, and less than half (about 38%) of its funding has been announced. This represents a 13.5% increase in the past six months, signaling that the pace of infrastructure development is accelerating.
One major project already underway is the Brent Spence Bridge between Cincinnati and Covington, Kentucky, which is just one example of the massive impact the IIJA is having. In fact, the White House reported that more than 56,000 infrastructure projects are now underway across over 4,500 localities in the U.S., a 40% increase over the past six months.
This steady ramp-up in activity is expected to drive the U.S. construction industry’s growth by 2.5% in real terms in 2024, bolstered by public and private investments. The sector is forecasted to grow at an annual rate of 3.9% between 2025 and 2028, fueled by funding from the IIJA and other initiatives like the Inflation Reduction Act (IRA).
With so much capital flowing into energy, transportation, and housing infrastructure, it’s clear that this sector is on the rise. Instead of selecting individual stocks within this rapidly evolving landscape, investing in infrastructure-focused ETFs like PAVE, IGF, and IFRA offers broad exposure across multiple sectors, including industrials, energy, and communication services.
Let’s look at the fundamentals of the above-mentioned infrastructure ETFs in detail:
iShares Global Infrastructure ETF (IGF)
IGF, managed by BlackRock Fund Advisors, invests in companies operating across energy, oil, gas, consumable fuels, transportation, and other infrastructure sectors. The fund uses a representative sampling technique to track the S&P Global Infrastructure Index’s performance.
The fund has a total of 75 holdings. Its top holdings include NextEra Energy, Inc. (NEE) with a 6.06% weighting, Transurban Group Ltd. (TCL) at 4.83%, followed by Aena SME SA (ANEA) and Enbridge Inc. (ENB) with 4.81% and 4.26% weightings, respectively.
IGF’s trailing-12-month dividend of $1.74 yields 3.26% on the current price level, while its four-year average dividend yield is 2.72%. Over the past three years, its dividend payouts have grown at a CAGR of 11.4%.
The fund has an expense ratio of 0.42% compared to the category average of 0.44%. IGF’s fund outflows over the past month came in at $120.46 million. Also, the ETF has a beta of 0.87.
IGF has gained 17.5% over the past year and 16% over the past six months to close the last trading session at $53.78. As of September 16, 2024, IGF had an AUM of $3.99 billion and an NAV of $53.74.
IGF’s POWR Ratings reflect this promising outlook. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
IGF also has an A grade for Trade, Buy & Hold, and Peer. Among the 133 ETFs in the B-rated Global Equities ETFs group, it is ranked #8. To access all of IGF’s POWR Ratings, click here.
iShares U.S. Infrastructure ETF (IFRA)
BlackRock Fund Advisors manages IFRA, an ETF that aims to track the performance of the NYSE FactSet U.S. Infrastructure Index. The fund invests in stocks of U.S. companies operating across various market capitalizations, focusing on those involved in infrastructure-related sectors like materials, industrials, construction transportation, and utilities.
With $2.58 billion in AUM, its top holdings are Pinnacle West Capital Corporation (PNW), ONE Gas, Inc. (OGS), Middlesex Water Company (MSEX), and WEC Energy Group Inc. (WEC), each with a 0.83% weighting in the fund, respectively. The ETF has a total of 160 holdings.
The ETF’s expense ratio is 0.30%, lower than the category average of 0.44%. IFRA fund inflows were $119.46 million over the past three months and $131.65 million over the past year.
The fund pays an annual dividend of $0.79, which translates to a 1.73% yield at the current price level. Its four-year average yield is 1.89%.
IFRA has gained 15.4% over the past nine months and 19.8% over the past year to close the last trading session at $46.05. The fund’s NAV was $46.02 as of September 16, 2024.
IFRA’s solid fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade and Buy & Hold. IFRA is ranked #8 among 36 ETFs in the B-rated Industrials Equities ETFs group. Click here to see IFRA’s rating for Peer.
Global X U.S. Infrastructure Development ETF (PAVE)
PAVE seeks to invest in companies that benefit from a potential increase in infrastructure activity in the United States, including those involved in producing raw materials, heavy equipment, engineering, and construction. Global X Management Company LLC manages the fund.
The fund has $7.95 billion in assets under management (AUM). Its top holdings are Trane Technologies plc (TT) with a 3.80% weighting, Parker-Hannifin Corporation (PH) at 3.38%, Eaton Corp. Plc (ETN), and United Rentals, Inc. (URI), at 3.32% each respectively. The fund has a total of 100 holdings.
PAVE has an expense ratio of 0.47%, compared to the category average of 0.44%. Its fund inflows were $179.57 million over the past three months and $1.48 billion over the past year.
The fund pays an annual dividend of $0.24, translating to a 0.61% yield at the prevailing price level. Its dividend payouts have grown at a 35.3% CAGR over the past three years. The fund’s four-year average yield is 0.58%.
Over the past nine months, PAVE has gained 26.3% to close the last trading session at $39.09. The ETF had an NAV of $39.10 as of September 16, 2024.
PAVE’s bright prospects are reflected in its POWR Ratings. The ETF’s overall B rating equates to a Buy in our proprietary rating system.
PAVE has an A grade for Buy & Hold and a B for Trade. Of the 36 ETFs in the Industrials Equities ETFs group, it is ranked #19.
Beyond what we stated above, we have also given PAVE a grade for Peer. Get all PAVE ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
IGF shares were trading at $53.87 per share on Tuesday afternoon, up $0.09 (+0.17%). Year-to-date, IGF has gained 16.44%, versus a 19.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More…
