Top 3 Infrastructure ETFs to Buy as Projects Grow

The Infrastructure Investment and Jobs Act (IIJA) and other federal initiatives have been a key boost for the infrastructure sector, helping it grow even as other parts of the construction industry slow. In 2024, $1.8 trillion in federal funding will flow into the economy through grants, loans and tax credits, according to S&P Global.

Investors looking to benefit from this growth could consider investing in fundamentally sound ETFs such as the Global X US Infrastructure Development ETF (PAVE), iShares Global Infrastructure ETF (IGF) and iShares US Infrastructure ETF (IFR).

According to White House data analyzed by CNBC, the largest share of IIJA funding is directed toward road and bridge projects, followed by rail, broadband, energy and water projects. So far, 165,000 miles of roads have been improved, and more than 9,400 bridges are currently being repaired.

And yet we are only half over the five-year period of IIJA, and less than half (about 38%) of its funding has been announced. This represents a 13.5% increase over the past six months, signaling that the pace of infrastructure development is accelerating.

One of the major projects that is already underway is Brent Spence Bridge between Cincinnati and Covington, Kentucky, which is just one example of the enormous influence IIJA has. In fact, the White House reported that more than 56,000 infrastructure projects are now being conducted in more than 4,500 locations across the U.S., an increase of 40% over the last six months.

Continued growth in activity is expected to drive growth in the US construction sector 2.5% in real terms in 2024, supported by public and private investment. The sector is projected to grow at an annual rate of 3.9% between 2025 and 2028, driven by funding from IIJA and other initiatives such as the Inflation Reduction Act (IRA).

With so much capital flowing into energy, transportation, and housing infrastructure, it’s clear that this sector is growing. Rather than picking individual stocks in this rapidly changing landscape, investing in infrastructure-focused ETFs like PAVE, IGF, and IFRA offers broad exposure to multiple sectors, including industrials, energy, and communications services.

Let’s take a closer look at the basic principles of the above-mentioned infrastructure ETFs:

iShares Global Infrastructure ETF (IGF)

IGF, managed by BlackRock Fund Advisors, invests in companies operating in the energy, oil, gas, consumer fuels, transportation and other infrastructure sectors. The fund uses a representative sampling technique to track the performance of the S&P Global Infrastructure Index.

The fund has a total of 75 positions. best positions includes NextEra Energy, Inc. (FROM HOME) with a share of 6.06%, Transurban Group Ltd. (TCL) with a share of 4.83%, followed by Aena SME SA (ANEA) and Enbridge Inc. (ENB) with a weight of 4.81% and 4.26%, respectively.

Last 12 months of IGF dividend of $1.74 yields 3.26% at current price levels, while the four-year average dividend yield is 2.72%. Over the past three years, dividend payments have grown at a CAGR of 11.4%.

The fund has an expense ratio of 0.42% compared to the category average of 0.44%. IGF Fund has seen outflows of $120.46 million over the past month. The ETF also has a beta of 0.87.

IGF has gained 17.5% over the past year and 16% over the past six months, closing the last trading session at $53.78. As of September 16, 2024, IGF had an AUM of $3.99 billion and Net worth $53.74.

IGFs POWR Ratings reflect this promising outlook. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. POWR Ratings are calculated based on 118 different factors, with each factor weighted optimally.

IGF also has an A rating for Trade, Buy & Hold, and Peer. Out of 133 ETFs rated B Global Equity ETFs group, ranks 8th. To access all POWR IGF ratings, Click here.

iShares US Infrastructure ETF (IFR)

BlackRock Fund Advisors manages IFRA, an ETF that tracks the performance of the NYSE FactSet US Infrastructure Index. The fund invests in U.S. stocks across a range of market capitalizations, with a focus on those involved in infrastructure-related sectors such as materials, industrials, construction, transportation, and utilities.

With assets worth $2.58 billion, best positions are Pinnacle West Capital Corporation (PNW), ONE Gas, Inc. (OGS), Middlesex Water Company (MSEX) and WEC Energy Group Inc. (WEC), each with a 0.83% weighting in the fund. The ETF has a total of 160 shares.

The ETF’s expense ratio is 0.30%, which is lower than the category average of 0.44%. The IFRA fund has seen inflows of $119.46 million over the past three months and $131.65 million over the past year.

The fund pays an annual dividend of $0.79, which at current prices translates to a yield of 1.73%. Its four-year average yield is 1.89%.

The IFRA fund gained 15.4% over the last nine months and 19.8% over the last year, closing the last session at $46.05. The fund’s net asset value was $46.02 as of September 16, 2024.

IFRA’s solid fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to Strong Buy in our proprietary rating system.

The fund has an A rating for Trade and Buy & Hold. IFRA ranks 8th among 36 B-rated ETFs Industrial Stock ETFs group. Click here to see the IFRA rating for Peer.

Global X US Infrastructure Development ETF (PAVE)

PAVE seeks to invest in companies that benefit from the potential growth in infrastructure activity in the United States, including those involved in raw materials production, heavy equipment, engineering and construction. Global X Management Company LLC manages the fund.

The fund has $7.95 billion in assets under management (AUM). best positions is Trane Technologies plc (TT) with a share of 3.80%, Parker-Hannifin Corporation (PH) at 3.38%, Eaton Corp. Plc (ETN) and United Rentals, Inc. (URI), 3.32% each. The fund has a total of 100 shares.

PAVE expense ratio is 0.47%, compared to the category average of 0.44%. Fund inflows were $179.57 million over the past three months and $1.48 billion over the past year.

The fund pays an annual dividend of $0.24, which translates to a 0.61% yield at current prices. Dividend payments have increased by 35.3% CAGR over the past three years. The fund’s four-year average yield is 0.58%.

Over the past nine months, PAVE has gained 26.3%, closing the last trading session at $39.09. The ETF had Net worth $39.10 as of September 16, 2024

PAVE’s strong prospects are reflected in its POWR Ratings. The ETF’s overall B rating corresponds to a Buy in our proprietary rating system.

PAVE has a rating of A for Buy & Hold and B for Trade. It ranks 19th out of 36 ETFs in the Industrials Equities ETFs group.

In addition to what we stated above, we have given PAVE a Peer rating. Get all PAVE ratings Here.

What to do next?

Steve Reitmeister, a 43-year investment veteran, has just released his 2024 market predictions along with a trading plan and a list of 11 top picks for the coming year.

Stock market outlook for 2024 >

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IGF stock was trading at $53.87 per share Tuesday afternoon, up $0.09 (+0.17%). Year to date, IGF has gained 16.44%, compared with a 19.13% gain for the benchmark S&P 500 during the same period.

About the Author: Shweta Kumari

Shweta’s deep interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make informed investment decisions. More…

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