Infrastructure exchange-traded funds (ETFs) provide exposure to companies that build and maintain major projects and systems such as roads, bridges, waterways, railways, communication networks, and electricity systems. Companies in the infrastructure sector include Dominion Energy Inc. (D), Fortis Inc. (FTS), and Consolidated Edison Inc. (ED). Investors seeking to own a diversified basket of infrastructure companies, rather than betting on an individual stock, might consider an infrastructure ETF.
- The infrastructure sector underperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are IFRA, NFRA, and TOLZ.
- The top holdings of these ETFs are Olin Corp., Canadian National Railway Co., and American Tower Corp., respectively.
There are 6 distinct infrastructure ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). The infrastructure sector, as measured by the S&P Global Infrastructure Index, has significantly underperformed the broader market with a total return of -4.8% over the past 12 months compared to the S&P 500's total return of 17.9%, as of November 17, 2020. The best-performing infrastructure ETF, based on performance over the past year, is the iShares U.S. Infrastructure ETF (IFRA). We examine the top 3 best infrastructure ETFs below. All numbers below are as of November 18, 2020.
- Performance over 1-Year: 5.6%
- Expense Ratio: 0.40%
- Annual Dividend Yield: 1.77%
- 3-Month Average Daily Volume: 38,486
- Assets Under Management: $59.1 million
- Inception Date: April 3, 2018
- Issuer: iShares
IFRA tracks the NYSE FactSet U.S. Infrastructure Index, an index composed of U.S. companies that benefit from increases in infrastructure activity. The ETF provides exposure to a range of infrastructure companies, including railroads and utilities, materials and construction companies, and more. It follows a blended strategy, investing in a mix of value and growth stocks across the market cap spectrum. About 42% of the fund's 134 holdings are utilities companies, while 31% are industrials companies, and 21% are materials companies. The fund's top three holdings include Olin Corp. (OLN), a manufacturer of chemicals and ammunition products; Fluor Corp. (FLR), a provider of oil and gas infrastructure construction services; and Allegheny Technologies Inc. (ATI), a producer of specialty materials such as titanium, nickel-based alloys, and more.
- Performance over 1-Year: 3.5%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 2.21%
- 3-Month Average Daily Volume: 97,982
- Assets Under Management: $2.1 billion
- Inception Date: October 8, 2013
- Issuer: FlexShares
NFRA tracks the STOXX Global Broad Infrastructure Index, a global equity index composed of companies involved in the infrastructure sector. The ETF is focused on large-cap companies that derive at least half of their revenue from one or more of the following segments: energy, communications, utilities, transportation, and government outsourcing, such as hospitals, prisons, and postal services. The fund is primarily focused on North American equities, followed by Japan, Australia, Spain, and others. Its top three holdings include Canadian National Railway Co. (CNR:TSE), a Canada-based rail and related transportation company; Verizon Communications Inc. (VZ), a multinational telecommunications conglomerate; and class A shares of Comcast Corp. (CMCSA), a provider of media and television broadcasting services.
- Performance over 1-Year: -4.1%
- Expense Ratio: 0.46%
- Annual Dividend Yield: 3.21%
- 3-Month Average Daily Volume: 33,921
- Assets Under Management: $141.3 million
- Inception Date: March 25, 2014
- Issuer: ProShares
TOLZ tracks the Dow Jones Brookfield Global Infrastructure Composite Index, which is composed of global pure-play infrastructure companies. The ETF is focused on large-cap equities across the infrastructure sector in developed markets. It offers exposure exclusively to companies whose primary business is owning and operating infrastructure projects. These companies enjoy growing global demand and their businesses have high barriers to entry that limit competition. Companies that supply services to the infrastructure industry, like construction and engineering, are excluded. The fund follows a blended strategy, investing in a mix of both growth and value stocks. Its top three holdings include American Tower Corp. (AMT), a real estate investment trust (REIT) that owns, operates, and develops multi-tenant communications real estate; Crown Castle International Corp. (CCI), a REIT that provides access to wireless infrastructure; and Enbridge Inc. (ENB), a Canada-based energy transportation company.
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