Members of Congress agree on very few things. But in the last four years, there has been bipartisan support for updating our country's infrastructure. This has resulted in over $1 trillion flowing into the economy through the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act.
And depending on where you live, you know that many of these dollars are still making their way into the U.S. economy to rebuild roads and bridges and to update our aging electric grid. This is to say nothing for the demand for data centers, which will only increase through the rest of the decade.
Regardless of the outcome of November's election, infrastructure spending will continue. In this special presentation, we're looking at seven infrastructure stocks that can help protect your portfolio from market volatility while delivering a solid total return.
Quick Links
- Caterpillar
- Duke Energy
- Equinix
- Cameco
- Chevron
- Enbridge
- Global X U.S. Infrastructure Development ETF
#1 - Caterpillar (NYSE:CAT)
Caterpillar Inc. (NYSE: CAT) stock is up approximately 42% in the last 12 months and about 31% in 2024. Investors haven’t been shy about front-running the impact that infrastructure dollars would have on the company’s revenue and earnings. And on September 30, Caterpillar received a bullish upgrade from Bank of America, which reiterated its Buy rating and raised its price target on CAT stock to $434.
Lower interest rates provide a compelling supply-demand story for Caterpillar. Simply put, it’s more cost-effective for businesses to finance Caterpillar’s heavy equipment, which dovetails with the increase in demand for infrastructure projects.
And this demand comes at a time when Caterpillar has launched its Dynamic Energy Transfer (DET) system. This can charge a machine’s battery while its operating, which is not only a sustainable technology solution but also results in more efficiency and productivity.
About Caterpillar
Caterpillar Inc manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives in worldwide. Its Construction Industries segment offers asphalt pavers, compactors, road reclaimers, forestry machines, cold planers, material handlers, track-type tractors, excavators, telehandlers, motor graders, and pipelayers; compact track, wheel, track-type, backhoe, and skid steer loaders; and related parts and tools.
Read More - Current Price
- $366.04
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 6 Hold Ratings, 4 Sell Ratings.
- Consensus Price Target
- $384.33 (5.0% Upside)
#2 - Duke Energy (NYSE:DUK)
Utilities stocks aren’t always the most attractive to own. But in a lower interest rate cycle, companies like Duke Energy Corp. (NYSE: DUK) should be attractive to investors.
Utility companies, in general, carry a lot of debt. In theory, that could eat into earnings, but that hasn't been the case with Duke Energy. Full-year earnings per share (EPS) in 2023 were $5.56, which edged out the $5.33 EPS posted in 2022. And the first two quarters of 2024 continue that year-over-year growth.
Nevertheless, analysts have been raising their price targets since Duke Power reported earnings in August. And that activity has continued after the Federal Reserve lowered interest rates in September.
As of October 1, 2024, these increased price targets haven’t sufficiently raised the consensus price target. However, investors can buy DUK stock and collect its attractive dividend, which has increased for 20 consecutive years and currently has a 3.6% yield.
About Duke Energy
Duke Energy Corporation, together with its subsidiaries, operates as an energy company in the United States. It operates through two segments: Electric Utilities and Infrastructure (EU&I), and Gas Utilities and Infrastructure (GU&I). The EU&I segment generates, transmits, distributes, and sells electricity in the Carolinas, Florida, and the Midwest.
Read More - Current Price
- $108.28
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $122.23 (12.9% Upside)
#3 - Equinix (NASDAQ:EQIX)
The infrastructure sector isn’t limited to physical infrastructure; it also includes digital infrastructure. This area is growing exponentially as the need for data centers expands. That’s why you should consider Equinix (NASDAQ: EQIX). Equinix is one of the world’s leading infrastructure companies, and it operates as a real estate investment trust (REIT).
Although the Equinix’s portfolio includes 260 data centers in 72 markets throughout the world, the company continues investing to meet rising demand. In a high-interest-rate environment, that investment has weighed on earnings, but that will likely change over the next 12 months.
At least that’s the opinion of analysts, who have increased their price targets significantly since the company’s earnings report in August, and also since the Federal Reserve’s announcement in September.
And like any REIT, you should pay attention to the dividend. The company has increased its dividend by an average of 10.84% in the last three years - that’s more than 4x the current rate of inflation. And with the anticipation of more stock price growth, EQIX looks like a solid buy.
About Equinix
Equinix (Nasdaq: EQIX) is the world's digital infrastructure company . Digital leaders harness Equinix's trusted platform to bring together and interconnect foundational infrastructure at software speed. Equinix enables organizations to access all the right places, partners and possibilities to scale with agility, speed the launch of digital services, deliver world-class experiences and multiply their value, while supporting their sustainability goals.
- Current Price
- $927.22
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 15 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $976.81 (5.3% Upside)
#4 - Cameco (NYSE:CCJ)
For much of 2024, as the world looked for sources of clean energy, analysts have been pointing to nuclear energy as a likely winner. And it’s not only about finding sources of clean energy but finding clean energy that can be available at scale.
That brings you to nuclear power and the demand for uranium - which then leads you to Canadian-based Cameco Corp. (NYSE: CCJ). Camecom is the world’s largest publicly traded uranium producer and has several active mining projects. It’s also partnering in a joint venture to develop a laser-based uranium enrichment technology. This has the potential to be a solution for enriching uranium safer, more efficiently and more cost-effectively.
CCJ stock is up 10.8% in 2024, but that’s largely because of a surge of around 16% in September. Analysts believe the rally will continue. They have a $66.26 consensus price target on CCJ stock, which provides an upside of 38%.
About Cameco
Cameco Corporation provides uranium for the generation of electricity. It operates through Uranium, Fuel Services, Westinghouse segments. The Uranium segment is involved in the exploration for, mining, and milling, purchase, and sale of uranium concentrate. The Fuel Services segment engages in the refining, conversion, and fabrication of uranium concentrate, as well as the purchase and sale of conversion services.
Read More - Current Price
- $52.44
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $66.56 (26.9% Upside)
#5 - Chevron (NYSE:CVX)
Chevron Corp. (NYSE: CVX) is not a pure-play infrastructure stock, but oil and gas stocks have several catalysts that point to higher oil prices. Lower interest rates, geopolitical risk in the Middle East, and now the recovery efforts in the southeast United States are all reasons to believe oil is ultimately moving higher.
The case for Chevron specifically is more boring, but significant. The Federal Trade Commission (FTC) cleared Chevron’s merger with Hess Corp. (NYSE: HES). There wasn’t much reason to believe that the merger wouldn’t go through, particularly as it was approved by shareholders of both companies. Still, it’s been a headwind on CVX stock.
Now that the merger is approved, investors can focus on a stock that is trading at 13.5x forward earnings and pays a dividend that has increased by an average of 5.39% - more than twice the current rate of inflation – over the past three years.
About Chevron
Chevron Corporation, through its subsidiaries, engages in the integrated energy and chemicals operations in the United States and internationally. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, production, and transportation of crude oil and natural gas; processing, liquefaction, transportation, and regasification of liquefied natural gas; transportation of crude oil through pipelines; transportation, storage, and marketing of natural gas; and carbon capture and storage, as well as a gas-to-liquids plant.
Read More - Current Price
- $142.85
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $175.19 (22.6% Upside)
#6 - Enbridge (NYSE:ENB)
Enbridge Inc. (NYSE: ENB) is a Canadian-based energy transportation and distribution company. The company’s operations include oil and natural gas pipelines, natural gas utilities, and renewable power investments. The compelling investment thesis for Enbridge is that it’s positioned for where the world’s energy needs are today and where it’s headed.
Higher interest rates have been a headwind for Enbridge, which relies on debt financing to maintain and expand its infrastructure. In fact, the company recently purchased three natural gas utilities in North Carolina. In addition to expanding the company’s geographic footprint, these utilities will lower the percentage of the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) from 57% to 50%.
Lower interest rates will decrease the cost of that debt and make Enbridge stock attractive to investors. Not that it’s been unattractive. ENB stock is up 13.6% in 2024. However, much of that gain is due to the company’s dividend, which has an attractive 6.43% yield.
About Enbridge
Enbridge Inc, together with its subsidiaries, operates as an energy infrastructure company. The company operates through five segments: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services. The Liquids Pipelines segment operates pipelines and related terminals to transport various grades of crude oil and other liquid hydrocarbons in Canada and the United States.
Read More - Current Price
- $41.37
- Consensus Rating
- Hold
- Ratings Breakdown
- 1 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $63.00 (52.3% Upside)
#7 - Global X U.S. Infrastructure Development ETF (BATS:PAVE)
The Global X U.S. Infrastructure Development ETF (BATS: PAVE) is a way to invest in the infrastructure boom without picking individual stocks. The PAVE ETF is comprised of 100 of the top stocks that fall under the category of infrastructure. As of October 1, 2024, approximately 62% of the fund’s holdings were under the category of industrials.
The fund has been a solid investment over the last five years. In fact, since March 2, 2020, the fund’s stock price is up approximately 225%. And that growth has been consistent as evidenced by the 38% growth in the fund in the last 12 months.
With all the catalysts listed for the other companies on this list, many of which are included in the PAVE ETF, there should be little concern over the fund’s valuation, which is estimated to be around 20x.
The PAVE ETF is a relatively young fund that has only been trading since March 1, 2017. It has $8.41 billion of assets under management and an expense ratio of 0.47%.
About Global X U.S. Infrastructure Development ETF
The Global X U.S. Infrastructure Development ETF (PAVE) is an exchange-traded fund that mostly invests in stocks based on a particular theme. The fund tracks a market-cap-weighted index of US-listed companies that derive the majority of their revenue from or have a stated business purpose related to infrastructure development.
Read More - Current Price
- $41.08
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 15 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $41.08 (0.0% Downside)
Infrastructure covers a diverse range of economic sectors, including energy, utilities, industrial, and transportation. However, most infrastructure stocks share some similarities: they produce strong, consistent revenue and earnings that lower the risk of your overall portfolio.
The seven stocks on this list only scratch the surface of how you can capitalize on the nation's growing investment in infrastructure. To find the best stocks for your needs, check out MarketBeat's Stock Lists tool, which helps you compare and analyze stocks by specific sectors.
While the government has spent $1 trillion on infrastructure to date, it's likely that there is even more to come. Millions of Americans have been affected by Hurricane Helene. So even though government spending is already at uncomfortable levels, more spending will be on the way to repair the damage. This will be a multi-year catalyst for infrastructure stocks - and another reason for you to consider investing in infrastructure stocks like the ones in this presentation.
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