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 PAVE, IFRA, and NFRA.
- The top holdings of these ETFs are Deere & Co., Builders FirstSource Inc., and Canadian National Railway Co., 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 -7.8% over the past 12 months compared to the S&P 500's total return of 19.7%, as of February 9, 2021. The best-performing infrastructure ETF, based on performance over the past year, is the Global X U.S. Infrastructure Development ETF (PAVE). We examine the top 3 best infrastructure ETFs below. All numbers below are as of February 10, 2021.
- Performance over 1-Year: 27.1%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.42%
- 3-Month Average Daily Volume: 844,090
- Assets Under Management: $1.2 billion
- Inception Date: March 6, 2017
- Issuer: Global X
PAVE tracks the INDXX U.S. Infrastructure Development Index, which provides exposure to infrastructure activity in the U.S. by companies that provide raw materials and heavy equipment, as well as companies engaged in physical construction and engineering. The ETF is comprised of companies with various market capitalizations, which are involved in various aspects of infrastructure development. The majority of its 101 holdings are within the industrials sector, followed by the materials and information technology sectors. The fund follows a blended strategy, investing in a mix of growth and value stocks. Its top three holdings include Deere & Co. (DE), a manufacturer of agricultural, construction, and forestry machinery; Emerson Electric Co. (EMR), a designer and manufacturer of electronic and electrical equipment, software, systems, and services; and Sempra Energy (SRE), an energy infrastructure company.
- Performance over 1-Year: 14.1%
- Expense Ratio: 0.40%
- Annual Dividend Yield: 1.96%
- 3-Month Average Daily Volume: 149,635
- Assets Under Management: $180.4 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 41% of the fund's 133 holdings are utilities companies, while 33% are industrials companies, and 19% are materials companies. The fund's top three holdings include Builders FirstSource Inc. (BLDR), a manufacturer and distributor of building products; Gibraltar Industries Inc. (ROCK), a manufacturer, processor, and distributor of various metals; and Trex Co. Inc. (TREX), a provider of wood-alternative decking and railing, outdoor lighting, and more.
- Performance over 1-Year: 2.0%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 2.18%
- 3-Month Average Daily Volume: 127,373
- Assets Under Management: $2.3 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 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, the U.K., and others. It follows a blended strategy of investing in both growth and value stocks of various market caps. The fund's top three holdings include Canadian National Railway Co. (CNR:TSE), a Canada-based rail and related transportation company; class A shares of Comcast Corp. (CMCSA), a provider of media and television broadcasting services; and Verizon Communications Inc. (VZ), a multinational telecommunications conglomerate.
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