Best Infrastructure Stocks

Who stands to benefit most from a heralded infrastructure boom? Companies that supply the materials and take on projects. 

While the sector remains at a standstill like the rest of the broader economy, investing in infrastructure stocks now might put you ahead of the curve. Here are a few stocks to keep an eye on., remembering that infrastructure will always be an issue, and the largest companies in this sector will always have massive contracts at their fingertips.

Overview: Infrastructure Stocks

Infrastructure can refer to the buildings that house our industries, the pipes and plumbing that keep fuel and water running and electricity power lines and panels. Infrastructure is essentially everything you don’t see — yet our economy and society can’t function without it. 

It’s often grouped into the industrial sector due to materials and construction. But infrastructure companies can also be utilities, tech firms or aerospace and defense contractors. 

Infrastructure stocks currently sit at a standstill — no one’s building anything with the country shutdown. If you want to invest in infrastructure stocks, understand that you likely won’t see outsized returns until the pandemic passes. 

An investment in infrastructure companies is an investment for the long haul, and the companies poised to profit from increased spending on infrastructure reside in the following industries:

• Materials: Infrastructure projects need steel, lumber, plastics and plenty of other materials for completion. The companies that produce these goods will do well when it comes time to refurbish roads, bridges and railways.
• Energy: Electrical grids and power stations are on the shortlist of infrastructure that needs a facelift, but energy companies also supply the power needed to execute high-level projects.
• Transportation: Companies that transport the raw materials and machinery needed to complete infrastructure projects such as trucking, shipping, rails, airlines and pipelines.
• Construction and engineering. Designers, developers and builders. These are the firms that make new infrastructure projects a reality. 

Projects are broken down into 2 categories: hard infrastructure and soft infrastructure. 

Hard infrastructure refers to the networks and channels that make economic activity possible. Roads, communications networks, airports, energy distribution channels and water and sewer systems all fall into the hard infrastructure category. 

Soft infrastructure refers to the facilities and networks that maintain societal health, such as schools, hospitals, police and firefighting forces and public parks. Most of the stocks here are focused on building and maintaining hard infrastructure. 

Best Online Brokers for Infrastructure Stocks

Investing in infrastructure stocks can solidify your portfolio, but you’ll need an appropriate broker to execute the best possible trades. Most infrastructure stocks have significant volume and shares aren’t in short supply among major brokers. 

Choosing a broker comes down to your trading style. If you want to day trade, make sure you use a broker with sophisticated charting tools so you can maximize your entry and exit points.

Features to Look for in Infrastructure Stocks

1. Increasing dividends: Infrastructure stocks are often from older, established companies that don’t spend money on research and development. Dividend payments can be an attractive feature, and the cream of the crop has a history of increasing them frequently. Look for companies that have been increasing dividends for a number of years.
2. Stable cash flow and low debt: Much like the oil and gas sector, infrastructure companies buy or lease expensive equipment that depreciates in a hurry. But the best infrastructure companies keep debt load manageable and cash flow steady.
3. Strong margins: Margin is the difference in the cost of producing a good or service versus what the business makes by selling it. Infrastructure projects can have tight budgets that often run over. Companies that maximize each dollar have the most successful stocks.

Reinforcing Your Portfolio with Infrastructure Stocks

Infrastructure stocks might not seem like wise investments at the moment. But there’s sure to be an upswell in support for new projects as the government may look to infrastructure spending as a way to kickstart the economy. 

Investing in infrastructure won’t provide superior returns right away, but it is a talking point among politicians in every state. At some point, there will need to be upgrades and changes to the national infrastructure, and these firms could stand to benefit from those changes.