ETFs
3 Infrastructure ETFs to Capitalize on Spending Boom
The infrastructure construction industry is becoming increasingly digitalized, with technology playing an increasingly critical role in the design, construction, and management of infrastructure projects. This trend is expected to continue in the near future.
Given this positive sentiment, investing in the Global X US Infrastructure Development ETF (PAVE), iShares Global Infrastructure Exchange Traded Fund (FGI) and the iShares US Infrastructure exchange-traded fund (The International Forest Research Institute (IFRA)) could be smart choices for those looking to capitalize on the spending boom.
The global infrastructure market is experiencing substantial growth, fueled by segments such as residential and non-residential construction, energy and utility infrastructure, and transportation infrastructure. This growth is supported by increased investments from both the public and private sectors, which aim to stimulate economic development and create employment opportunities.
The infrastructure sector market is expected to grow at a steady pace. CAGR of 6.3% by 2029. Additionally, as many industries experience rapid digital transformation, industrial services are essential to effectively implement Industry 4.0.
This leads to enhanced operational capabilities, predictive maintenance and data-driven decision making. The industrial services market is expected to grow at a rate of CAGR of 6.1% by 2028.
With that in mind, let’s look at the fundamentals of the three major infrastructure ETFs.
Global X ETF for US Infrastructure Development (PAVE)
PAVE seeks to invest in companies that stand to benefit from a potential increase in infrastructure activity in the United States, including those involved in the production of raw materials, heavy equipment, engineering and construction.
Funds main participations include Trane Technologies plc (TT) with a weighting of 3.7%, Eaton Corp. Plc (AND N) at 3.7%, followed by Emerson Electric Co. (DME) with a weighting of 3.2%.
PAVE’s 12-month dividend of $0.24 yields 0.62% at the current price level, while its four-year average yield is 0.58%. Its dividend payments have grown at a CAGR of 35.3% over the past three years.
The fund has a expense ratio of 0.47% compared to the category average of 0.44%. Over the past six months, PAVE’s inflows have amounted to $1.34 billion and $1.67 billion over the past year. Additionally, the ETF has a beta of 1.31.
PAVE has gained 19.4% over the past year and 12.5% over the past six months to close the last trading session at $37.85. As of July 12, 2024, PAVE had $7.26 billion in assets under management and a net asset value of $37.86.
The PAVE POWR Ratings reflects a strong outlook. Its overall rating is B, which equates to a Buy in our proprietary rating system. POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
PAVE has an A rating for Buy & Hold and a B rating for Trade. Of the 36 ETFs in the Industrial Stock ETF group, it is ranked #11.
Beyond what we’ve stated above, we’ve also given PAVE a peer rating. Get all PAVE ratings here.
iShares Global Infrastructure Exchange Traded Fund (FGI)
The iShares Global Infrastructure ETF seeks to replicate the investment results of an index of developed market infrastructure stocks. The fund typically invests at least 80% of its assets in the securities that comprise its index and in investments that have substantially the same economic characteristics as its index.
With $3.59 billion in assets under management, its main participations are NextEra Energy, Inc. (BORN), with a weighting of 5.6% in the fund, followed by Aena SME SA at 5% and Transurban Group Ltd. at 4.7%.
The ETF’s expense ratio is 0.41%, compared to the category average of 0.44%. IGF outflows totaled $58 million over the past month. The fund pays an annual dividend of $1.74, which translates to a yield of 3.49% at its current price. Its four-year average yield is 2.71%.
IGF has gained 15.3% over the past nine months and 5.9% over the past year to close the last trading session at $49.76. Its five-year beta is 0.86. The fund’s net asset value was $49.68 as of July 12, 2024.
IGF’s strong fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which is a Strong Buy in our proprietary rating system.
The fund has an A rating for Trade and Buy & Hold. IGF is ranked #8 among 133 ETFs in the B category Global Equity ETFs. Click here to access all IGF ratings.
iShares U.S. Infrastructure Exchange Traded Fund (The International Forest Research Institute (IFRA))
The iShares US Infrastructure ETF seeks to track the investment results of an index comprised of stocks of U.S. companies with exposure to infrastructure and that could benefit from a potential increase in domestic infrastructure activity.
The fund has $4.19 billion in assets under management (AUM). main participations are Meta Platforms Inc. (META) with a weighting of 22.5%, Alphabet Inc. (GOOGLE) at 12.3%, and Alphabet Inc. Class C (GOOG) at 9.4%.
IFRA has an expense ratio of 0.30%, compared to the category average of 0.44%. Its inflows were $75.67 million in the last three months and $10.54 million in the last six months. Additionally, its beta is 1.09, indicating higher volatility compared to the broader market.
The fund pays an annual dividend of $0.79, which translates to a yield of 1.82% at current price levels. Its dividend payments have grown at a CAGR of 11.2% over the past three years. The fund’s four-year average yield is 1.90%.
Over the past year, IFRA has gained 10.4% to close the last trading session at $43.25. It has also gained 1.8% over the past month. The ETF had a net asset value of $43.27 as of July 12, 2024.
IFRA’s POWR Ratings reflect this promising outlook. The ETF’s overall B rating equates to a Buy in our proprietary rating system.
IFRA has assigned an A grade for Buy & Hold and a B grade for Trade. Among the 36 ETFs in the Industrials Equities ETFs group, it is ranked #15. To access all of IFRA’s POWR Ratings, Click here.
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As of Friday afternoon, PAVE shares were trading at $38.44 per share, up $0.59 (+1.56%). Year-to-date, PAVE has gained 11.79%, compared to a 19.24% gain in the benchmark S&P 500 index over the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about financial markets and wealth management, which led her to pursue a career as an investment analyst. She holds a Bachelor’s degree in Finance and Marketing and is pursuing the CFA program. Her fundamental approach to stock analysis helps investors identify the best investment opportunities. More…