The American Society of Civil Engineers (ASCE) has given America’s Infrastructure a rating of C- in its 2021 report, because of its frequent water breaks, wear and tear of roads and bridges, and interrupting electricity. The deteriorating condition of US infrastructure is one of the key reasons behind President Biden’s proposed $2 trillion infrastructure and jobs package. Biden hopes to rebuild the majority of the existing infrastructure in areas of Transportation, Water, Broadband and Power, Housing and Education, and Manufacturing and Labor, in line with his aim to “Build Back Better.”

The huge government spending on infrastructure will benefit several companies involved in infrastructure-related activities in the upcoming months. Therefore, we expect Global X US Infrastructure Development ETF (PAVE) and iShares U.S. Infrastructure ETF (IFRA), which have substantial exposure to infrastructure stocks, to be positioned to deliver solid returns.

Global X US Infrastructure Development ETF (PAVE)

PAVE invests in companies that correspond generally to the price and yield performance of the Index U.S. Infrastructure Development Index. The fund invests at least 80% of its total assets in the securities of the underlying index. PAVE has $2.61 billion in assets under management. The ETF’s major holdings include Deere & Company (DE), Parker-Hannifin Corporation (PH), and Eaton Corp. PLC (ETN).

PAVE has an expense ratio of 0.47%, which is slightly higher than the category average of 0.43%. It also has an MSCI ESG Fund Rating of A. The ETF distributes $0.09 in dividends annually, which translates to a dividend yield of 0.37%. Its four-year average dividend yield is 0.49%.

PAVE is currently trading 109.4% above its 52-week low of $11.99. The ETF has gained 91.1% over the past year and 68% over the past nine months. The ETF’s net inflows amounted to $803.69 million over the past month.

PAVE’s POWR Ratings reflect this promising outlook. The ETF has an overall grade of A, which equates to Strong Buy rating in our proprietary ratings system. PAVE also has an A for Trade Grade and Buy & Hold Grade. Click here to see PAVE’s Peer Grade. Of the 33 ETFs in the B-rated Industrials Equities ETFs group, PAVE is ranked #8.

iShares U.S. Infrastructure ETF (IFRA)

IFRA tracks the NYSE FactSet US Infrastructure Index, which is composed of equities of U.S. companies that have infrastructure exposure, thus benefitting from a potential increase in domestic infrastructure activities. The index divides infrastructure companies into two types — enablers, and owners/operators, each with a 50% weighting in the index. The fund has approximately $397 million in assets under management (AUM). The ETF’s major holdings include Kansas City Southern (KSU), Hawaiian Electric Industries, Inc. (HE), and York Water Company (YORW).

IFRA has an expense ratio of 0.40%, which is slightly lower than the category average of 0.43%. It has an MSCI ESG Fund Rating of A, which reflects strong fundamentals with respect to environmental, social, and governance parameters. The ETF distributes an annual dividend of $0.58, which translates to a dividend yield of 1.66%. Its four-year average dividend yield is 1.86%.

IFRA is currently trading 77.7% above its 52-week low of $19.54. The ETF has gained 63.6% over the past year and 48.9% over the past nine months. The ETF’s net inflows amounted to $139.59 million over the past month.

IFRA’s POWR Ratings reflect this promising outlook. The ETF has an overall grade of A, which equates to Strong Buy rating in our proprietary ratings system. IFRA also has an A for Trade Grade and Buy & Hold Grade. Click here to see IFRA’s Peer Grade. It is ranked #20 in the same group.

PAVE shares were trading at $25.21 per share on Friday afternoon, up $0.10 (+0.40%). Year-to-date, PAVE has gained 18.86%, versus a 9.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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