Infrastructure companies make up the supporting backbone to a growing world economy. Additionally, sector stocks and related exchange traded funds provide investors with an attractive dividend yield.
The iShares S&P Global Infrastructure Index Fund (IGF) gives investors a diversified approach to global firms that construct and manage infrastructure assets, like toll roads, ports, railroads, water and wastewater systems. [Repairs to Aging Infrastructure Could Support Water ETFs]
“No one would dispute that there’s always demand for improvements to the world’s infrastructure,” writes ETF analyst Robert Goldsborough for Mormingstar. “Spending on global infrastructure depends on two things: local economic growth and government spending.”
Goldsborough, though, points out varying dynamics between the emerging and developing markets.
“Local economic growth, especially in emerging-markets countries, can drive infrastructure investments,” Goldsborough added. “In developed-markets nations, by contrast, local growth by definition is slower, but regular infrastructure upgrades often are necessary and desired.”
IGF tilts toward developed economies, with U.S. making up 30.6% of the portfolio, Canada 10.8%, U.K. 7.9%, Australia 7.3%, France 6.7%, Germany 6.1%, Italy 5.8%, Spain 5.2%, China 3.7% and Singapore 3.4%.
Utilities make up 40.2% of the overall portfolio, Industrials is 39.0% and Energy is 20.3%. Since the majority of the funds holdings includes yield-generating assets like utilities and master limited partnerships, the fund comes with a 3.98% 12-month yield.
However, the underperformance in the defensive utilities sector so far this year has dragged on the ETF’s overall performance. IGF is only up 3.1% year-to-date.
Other global infrastructure ETFs include the SPDR FTSE/Macquarie Global Infrastructure 100 ETF (GII) , but this fund has thin trading volumes so potential investors should monitor the bid/ask spreads. GII has a 12-month yield of 3.05%.
iShares S&P Global Infrastructure ETF
For more information on the infrastructure sector, visit our infrastructure category.
Max Chen contributed to this article.
- Investment & Company Information