Joe Biden assumed office of the U.S. presidency earlier this week, marking the beginning of a potential new era for the country. The first term of Biden’s presidency is expected to revolve around the nation’s recovery from the COVID-19 pandemic. With the Democratic Party now controlling the U.S. House of Representatives and the U.S. Senate, Biden hopes to gain approval for his $1.9 trillion coronavirus relief package in short order.
While the emergency fiscal stimulus package focuses on direct cash transfers seeking a short-term economic boost, Biden’s long-term plan involves a $2 trillion so-called Green New Deal. Through it, Biden seeks to invest approximately $500 billion each year to develop sustainable infrastructure nationwide, which should boost the country’s industrial and manufacturing sectors tremendously.
His proposal represents a vastly different approach than the one taken by former President Trump. Trump advocated for the privatization of infrastructure rather than hefty government spending on it.
A poll conducted by the Pew Charitable Trust in February 2020 stated that 68% of Americans supported an increase in federal infrastructure spending. With Biden’s approach garnering widespread support, we believe ETFs such as iShares U.S. Infrastructure ETF (IFRA), Global X U.S. Infrastructure Development ETF (PAVE) and iShares Global Infrastructure ETF (IGF) should be profitable investment bets for the long run.
iShares U.S. Infrastructure ETF (IFRA)
IFRA invests in companies that have direct and indirect exposure to the infrastructure sector in the U.S. . Its holding companies are divided into two categories – Infrastructure enablers and Infrastructure asset owners and operators — each having a 50% weighting in the ETF. IFRA closely tracks the NYSE FactSet U.S. Infrastructure Index, with $159.10 million in assets under management (AUM). The ETF’s major holdings include Builders FirstSource, inc. (BLDR), Gibraltar Industries, Inc. (ROCK) and Cleveland-Cliffs Inc. (CLF).
IFRA has an expense ratio of 0.40%, which is slightly lower than the category average of 0.44%. The ETF has gained 50.5% over the past nine months, 26.7% over the past six months and 3.5% year-to-date.
IFRA pays $0.56 in dividends annually, yielding 1.98% at the prevailing share price. Its four-year average dividend yield is 1.86%.
How does IFRA stack up in POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Overall POWR Rating.
It is currently ranked #20 of 32 ETFs in the Industrial Equities ETFs group.
Global X US Infrastructure Development ETF (PAVE)
PAVE invests in companies that operate at any point in the infrastructure supply chain. Launched in 2017, the ETF targets primarily companies that generate at least 50% of their revenues in the United States. Moreover, PAVE has an MSCI ESG Fund rating of “A,” which reflects strong fundamentals with respect to environmental, social and governance parameters.
PAVE has $1.05 billion in AUM, which is invested in 93 stocks. Its major holdings include United Rentals Inc. (URI) Trimble Inc. (TRMB) and Fastenal Company (FAST). The ETF is passively managed, seeking to replicate the returns of its underlying index INDXX U.S. Infrastructure Development Index.
PAVE has an expense ratio of 0.47%, which is 30 basis points higher than the category average of 0.44%. It has gained 80.9% over the past six months and 5.6% year-to-date.
PAVE pays $0.09 in dividends annually, yielding 0.41% at the current share price. Its four-year average dividend yield is 0.48%.
It is no surprise that PAVE is rated “Strong Buy” in our POWR Ratings system, with an “A” for Trade Grade and Buy & Hold Grade. It is currently ranked #9 in the Industrial Equities ETFs group.
iShares Global Infrastructure ETF (IGF)
As the name suggests, IGF has exposure to the global infrastructure industry. It invests in highly liquid equities and has an impressive track record. It thereby has a MSCI Fund Rating of “A”. The ETF is ranked in the 82nd percentile among its peers. IGF tracks the benchmark S&P 500 Global Infrastructure Index and has approximately $3.08 billion in AUM. Its major holdings comprise Aena SME SA, NextEra Energy Inc. (NEE) and Enbridge Inc. (ENB), which account for more than 15% of the portfolio.
IGF has an expense ratio of 0.46%, which slightly higher than the category average of 0.44%. It has gained 26.9% over the past nine months, and 10.6% over the past three months.
IGF pays $1.02 in dividends on a semi-annual basis, yielding 2.3% at the prevailing price. Its four-year average dividend is 3.2%.
IGF’s POWR Ratings reflect this promising outlook. It is rated “Buy” with an “A” for Trade Grade, and a “B” for Buy & Hold Grade and Industry Rank. In the 116-ETF Global Equities ETFs group, IGF is ranked #68.
More Great Investing Ideas?
IFRA shares were trading at $30.86 per share on Friday morning, down $0.19 (-0.61%). Year-to-date, IFRA has gained 2.90%, versus a 2.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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