Investing in Infrastructure ETFs presents a compelling opportunity in the current market, driven by increased transaction activity and a robust deal pipeline. Infrastructure assets tend to perform well in volatile and high-inflation environments, offering stability and resilience. As investor interest in infrastructure grows, confidence in its potential for returns strengthens.
Therefore, investors may consider investing in strong Infrastructure ETFs like the iShares U.S. Infrastructure ETF (IFRA), Global X U.S. Infrastructure Development ETF (PAVE), and The Industrial Select Sector SPDR Fund (XLI) for long-term stability.
Reliable infrastructure is crucial for connecting supply chains, moving goods, and providing access to employment, healthcare, and education. By focusing on value creation and efficiency, infrastructure supports sustainable growth regardless of economic fluctuations. The ongoing consolidation of infrastructure investment firms signals a maturing and stable market.
This year, the Biden-Harris Administration strengthened the infrastructure sector by allocating $62 billion from the Bipartisan Infrastructure Law to states for critical upgrades, creating jobs, and improving transportation systems. Meanwhile, Mordor Intelligence projects the infrastructure market to grow from $2.72 trillion in 2024 to $3.69 trillion by 2029, with a CAGR of 6.3%.
This year, the Biden-Harris Administration boosted the infrastructure market by allocating $62 billion from the Bipartisan Infrastructure Law to states for essential improvements, creating jobs and enhancing transportation. Meanwhile, according to a report by Mordor Intelligence, the infrastructure sector will expand from $2.72 trillion in 2024 to $3.69 trillion by 2029, growing at a CAGR of 6.3%.
Given this stable environment, let’s evaluate the fundamentals of the three Industrials Equities ETFs mentioned above.
Stock #3: iShares U.S. Infrastructure ETF (IFRA)
IFRA is an exchange-traded fund launched by BlackRock, Inc., and it is managed by BlackRock Fund Advisors. The fund invests in U.S. public equity markets, targeting stocks in sectors such as materials, industrials, capital goods, construction, engineering, machinery, transportation, railroads, and utilities. It invests in both growth and value stocks of companies across diversified market capitalizations. The fund seeks to track the performance of the NYSE FactSet U.S. Infrastructure Index using a representative sampling technique.
With $2.76 billion in assets under management (AUM), IFRA’s top holding is Vistra Corp. (VST) with a 1.20% weighting, followed by Constellation Energy Corporation (CEG), with a 1.11% weighting, and NRG Energy, Inc. (NRG), with 0.84%. IFRA has a total of 163 holdings.
IFRA has an expense ratio of 0.30%, lower than the category average of 0.44%. It currently has a NAV of $46.60. Its fund inflows came in at $189.72 million over the past six months.
The ETF pays an annual dividend of $0.82, which yields 1.75% on the current price. It has a four-year average dividend yield of 1.88%.
IFRA has gained 30.3% over the past year and 17.6% over the past nine months to close the last trading session at $46.86.
IFRA’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
IFRA has an A grade for Buy & Hold and Trade and a B for Peer. In the B-rated Industrials Equities ETFs group, it is ranked #9 out of 36 stocks. Click here to access all of IFRA’s POWR Ratings.
Stock #2: Global X U.S. Infrastructure Development ETF (PAVE)
Global X Funds - Global X U.S. Infrastructure Development ETF is an exchange-traded fund launched and managed by Global X Management Company LLC. It invests in the U.S. public equity markets, targeting stocks in construction and engineering, infrastructure raw materials, composites, industrial transportation, and heavy construction equipment. The fund targets both growth and value stocks across diversified market capitalizations. Additionally, it seeks to track the performance of the Indxx U.S. Infrastructure Development Index using a full replication technique.
With $8.41 million in assets under management (AUM), PAVE’s top holding is Trane Technologies plc (TT) with a 3.83% weighting, followed by United Rentals, Inc. (URI), with a 3.42% weighting, and Eaton Corp. Plc (ETN), with 3.41%. It has a total of 101 holdings.
It has an expense ratio of 0.47%, higher than the category average of 0.44%. It currently has a NAV of $40.92. PAVE’s fund inflows came in at $1.48 billion over the past year.
The ETF pays an annual dividend of $0.24, which yields 0.58% on the current price. Also, it has a four-year average dividend yield of 0.58%.
PAVE has gained 36.63% over the past year and 22.5% over the past nine months to close the last trading session at $41.33.
PAVE’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system. PAVE has an A grade for Buy & Hold and Trade and a B for Peer. Within the same group, it is ranked #2. Click here to access all of PAVE’s POWR Ratings.
Stock #1: The Industrial Select Sector SPDR Fund (XLI)
XLI is an exchange-traded fund launched by State Street Global Advisors, Inc., and managed by SSGA Funds Management, Inc. The fund invests in the public equity markets of the United States, focusing on stocks of companies in the industrials sector. It targets both growth and value stocks across a diversified market capitalization. The fund seeks to track the performance of the Industrial Select Sector Index using a full replication technique.
With $20.23 billion in AUM, the fund has a total of 80 holdings. XLI’s top holding is GE Aerospace (GE) with a 4.89% weighting, followed by Caterpillar Inc. (CAT) with a 4.65% weighting, and RTX Corporation (RTX) with 4.01%.
XLI has an expense ratio of 0.09%, lower than the category average of 0.47%. It currently has a NAV of $135.45. Its fund inflows came in at $1.18 billion over the past year.
The ETF pays an annual dividend of $1.84, which yields 1.36% on the current price. XLI has a four-year average dividend yield of 1.50%.
XLI has gained 21.8% over the past nine months and 35.5% over the past year to close the last trading session at $136.56. Its 24-month beta is 0.90.
XLI’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It has an A grade for Buy & Hold, Peer, and Trade. It is ranked first in the Industrials Equities ETFs group. To access all the POWR Ratings for XLI, click here.
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XLI shares were trading at $136.69 per share on Wednesday afternoon, up $1.21 (+0.89%). Year-to-date, XLI has gained 21.09%, versus a 22.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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