In his 2019 State of the Union address, President Trump announced an infrastructure plan to “build gleaming new roads, bridges, highways, railways, and waterways across our land.” That $2 trillion commitment to spending collapsed in the wake of political squabbles later in the year. Nevertheless, the need is ongoing, making exchange-traded funds (ETFs) that focus on this sector attractive.
The top American infrastructure ETFs have been regularly paying handsome dividends. There is a lot of stability in companies that build infrastructure because their contracts tend to be for extended terms. Revenues are steady, and future earnings are predictable.
In 2020, similar to many other sectors, technology and technology disruption will be a factor. Therefore, many predictions for plans and top companies in the sector will be highly influenced by factors such as changes in electricity generation, transportation modes, and communication methods. Winners in the infrastructure category are likely to have an edge in technological innovations.
As a result, the infrastructure sector is expected to grow broadly, with established companies offering higher dividends to entice investors. Below are four of the top infrastructure ETFs with return momentum expected to carry through 2020. Funds were chosen based on category performance. Note that none of these ETFs are a pure play on U.S. infrastructure—they invest globally—but they all have significant U.S. exposure; around 30% to 40% of the represented countries tend to be American.
All figures are current as of January 3, 2020.
- The need for new roads, bridges, expressways, tunnels, and other types of infrastructure is an ongoing one, which can make infrastructure ETFs a good play.
- Four leading U.S. ETFs that specialize in the sector include SPDR S&P Global Infrastructure ETF (GII), iShares Global Infrastructure ETF (IGF), Legg Mason Global Infrastructure ETF (INFR), and FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA).
1. SPDR S&P Global Infrastructure ETF (GII)
- Net Assets: 402.48M
- Yield: 3.12%
- One-Year Daily Total Return: 25.28%
- Expense Ratio (net): 0.40%
This fund follows the S&P Global Infrastructure Index, which is made up of the top 75 publicly traded infrastructure companies throughout the world. It seeks to mimic the total performance of that benchmark and therefore keeps at least 80% of its assets in index securities. It also invests in depositary receipts that are based on securities from the index. Sector-wise, its major weightings are in industrials (primarily transportation) and utilities (about 40% of the portfolio each), with energy a distant third (19.71%). The companies it owns are primarily in the U.S., Canada, and Australia.
2. iShares Global Infrastructure ETF (IGF)
- Net Assets: 3.38B
- Yield: 3.16%
- One-Year Daily Total Return: 25.31%
- Expense Ratio (net): 0.46%
This fund—the biggest, oldest, and most liquid in the infrastructure category—also tracks the S&P Global Infrastructure Index, so its sector and nation weightings are pretty similar to GII.'s. However, it keeps 90% of its assets in securities from the underlying index. It may also invest in securities that are similar to those of the index. Up to 10% of its assets may be invested in futures, options, and swaps. It only invests in companies that are in developed countries.
3. Legg Mason Global Infrastructure ETF (INFR)
- Net Assets: 21.56M
- Yield: 3.36%
- One-Year Daily Total Return: 23.85%
- Expense Ratio (net): 0.40%
INFR follows the RARE Global Infrastructure Index, keeping a minimum of 80% of its funds in the index’s securities. All securities in the index, situated in both developed and developing markets, are also in the MSCI ACWI All Cap Index. INFR currently emphasizes utility companies; nearly half the portfolio (48.25%) belongs to this sector. Energy and industrial firms also have significant weightings. More unusually, the fund also includes telecommunications companies—cable and satellite providers—among its holdings. Around one-third of its companies are U.S.-based; Canada, Japan, and Australia are the other major nations.
4. FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA)
- Net Assets: 1.57B
- Yield: 2.33%
- One-Year Daily Total Return: 25.73%
- Expense Ratio (net): 0.47%
The benchmark for this fund is the STOXX Global Broad Infrastructure Index, which is designed to track the performance of infrastructure companies that are in both developed and emerging markets, including the U.S. NFRA invests at least 80% of its assets in the index securities (or in ADRs and GDRs based on them). Sector-wise, NFRA emphasizes industrials (34.58% of the portfolio), utilities (24.52%) and, like INFR, communication services (24.80%). Most of its holdings are based in the U.S., Canada, or Japan.