Four Dividend-paying Infrastructure Investments to Purchase
By: Paul Dykewicz,
Four dividend-paying infrastructure investments to purchase provide investors a chance to build their portfolios by tapping into government spending.
The four dividend-paying infrastructure investments to purchase offer “good inflation hedges” and a steadier source of growth then other equities, said Bob Carlson, a pension fund chairman who also heads the Retirement Watch investment newsletter. Among the reasons infrastructure businesses hold appeal is that they have fairly steady, reliable revenue, Carlson added.
Bob Carlson, head of Retirement Watch, meets with Paul Dykewicz
Many infrastructure stocks have revenue streams that automatically are adjusted for inflation, Carlson continued. Infrastructure stocks also tend to benefit from gaining a significant amount of their revenue from governments that have consistent sources of funding, compared to recession-vulnerable companies.
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Mutual Fund Included Among Four Dividend-paying Infrastructure Investments to Purchase
Among open-end mutual funds, Carlson said he likes Cohen & Steers Global Infrastructure (CSUAX). The fund has multiple share classes with different loads — a sales charge or commission — and fees. Many investment brokerages offer the A shares with the ticker CSUAX without any load.
“The fund doesn’t try to track an index,” Carlson said. “The managers can invest in any infrastructure company around the world. They can adjust their sector allocations and stock holdings based on their analysis of the economy and companies. Cohen & Steers first develops an economic outlook and then determines which infrastructure sectors are most likely to benefit from that outlook. Then, it analyzes each company in the sectors before deciding which to buy for the fund.”
The mutual fund tends to be focused on the managers’ favorite sectors and stocks. It recently held 54 stocks with 36% of the fund in the 10 largest positions.
Chart courtesy of www.stockcharts.com
Top holdings recently were NextEra Energy (NYSE: NEE), CSX (NASDAQ: CSX), Sempra Energy (NYSE: SRE), Grupo Aeroportuario (NYSE: PAC) and Transurban Group (OTCM: TRAUF). The mutual fund’s largest sector holdings consisted of electric utilities, 37%; midstream energy, 10%; freight rails, 10%; gas distribution, 9%; and airports, 8%.
The fund’s recent yield reached 2.91%. It lost 5.21% in 2022 but is up 2.77% so far in 2023 and 2.40% so far this year, through May 11.
UTF Earns Place Among Four Dividend-paying Infrastructure Investments to Purchase
Investors who are interested investing more aggressively in the sector should consider a closed-end fund, Cohen & Steers Infrastructure (UTF), Carlson counseled. The fund uses leverage to enhance dividends and total returns. The amount of leverage varies with the economic and interest rate outlook and recently was close to 30%.
UTF follows the same basic strategy as CSUAX and has the same management team, but there are some differences. For example, UTF has more than four times as many holdings as CSUAX.
In fact, UTF recently had 240 positions, with top holdings were NextEra Energy, Transurban Group, Enbridge (NYSE: ENB), American Tower (NYSE: AMT) and Canadian Railway (NYSE: CNI). About 29% of the fund is in the 10 largest positions.
The leading sectors in UTF were electric utilities (32%), corporate bonds (13%), midstream energy (10%), toll roads (7%), and freight rail (7%). The fund’s recent distribution yield reached 8.03%, with a small portion of the 2023 distributions consisting of return of capital. UTF lost 9.51% in 2022 and is down 1.01% so far in 2023.
Each fund has 50% to 60% of its assets in U.S.-based companies. The rest is invested outside the United States, mostly in developed economies.
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Brookfield Infrastructure Corporation Leads Four Dividend-paying Infrastructure Investments to Purchase
Brookfield Infrastructure Corporation (NYSE: BIPC), of Toronto, is up 10.66% since the stock was recommended by the Forecasts & Strategies investment newsletter on November 8, 2021. Mark Skousen, PhD, heads the Forecasts & Strategies investment newsletter and also teaches at Chapman University, where he is currently a Presidential Fellow. He also is a past winner for the university’s “My Favorite Professor” award.
Professor Mark Skousen leads Forecasts & Strategies.
Brookfield Infrastructure is one of the largest owners and operators of critical global infrastructure networks that facilitate the movement and storage of energy, water, freight, passengers and data. The company is intended to be a pure play, publicly traded, global infrastructure company. It aims to invest in “premier infrastructure assets” with stable cash flows, high margins and strong growth prospects, the company’s management said.
Its experienced management team has a proven track record and has identified a key goal of providing returns to unitholders. With an enticing distribution yield and a distribution growth target of 5-9% annually, Brookfield Infrastructure seeks to produce strong, risk-adjusted total returns for its investors.
Chart courtesy of www.stockcharts.com
Motorola Solutions Earns Place Among Four Dividend-paying Infrastructure Investments to Purchase
Motorola Solutions, Inc. (NYSE: MSI), a Chicago-based provider of mission-critical communications products and solutions & services for communities and businesses, received an outperform rating from the William Blair & Co. investment firm, also based in the Windy City. Despite beating analysts’ consensus first-quarter results and management boosting its guidance, Motorola’s stock has not lifted off.
“Although numbers and trends were strong, we believe that investors are starting to price in decelerating growth in the second half of the year on difficult comps associated with last year’s price increases,” according to a May 5 research note by William Blair equity research analyst Louis DiPalma. “In addition, the 2023 guidance does not reflect any potential impact from the U.K. price cap. We lowered our 2014 revenue estimate by the full potential impact, although we believe that the ultimate cap may be reduced.”
Motorola’s first-quarter financial results reflected positive local and state budget trends for the largest global provider of public safety technology, according to William Blair. Even though public companies typically do not raise their full-year guidance after the first quarter, Motorola’s management did so, DiPalma noted.
The company reported first-quarter revenue of $2.17 billion, compared with a consensus estimate of $2.13 billion. Motorola’s adjusted earnings per share (EPS) jumped to $2.22 above consensus estimates of $2.06.
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Lack of Payout Excludes Verra Mobility from Four Dividend-paying Infrastructure Investments to Purchase
Verra Mobility Corporation (NASDAQ: VRRM), of Mesa, Arizona, processes millions of transactions each year through connectivity with more than 50 individual tolling authorities and 400-plus issuing organizations. The stock is another “outperform” recommendation of William Blair.
Indeed, Willliam Blair described Verra Mobility as a “smart transportation provider” that reported first-quarter results that topped analysts’ consensus estimates. The investment firm’s full-year outlook for the stock reaffirmed its conservative assumption that travel demand will cool in the second half of the year.
Chart courtesy of www.stockcharts.com
Alternative to Four Dividend-paying Infrastructure Investments to Purchase
As far as Verra Mobility’s first-quarter 2023 results, its total revenue reached $191.9 million, a jump of 13% compared to $170.4 million for the first quarter of 2022. Service revenue growth rose 15% due to increases in travel volume and related tolling activity in the Commercial Services segment. That business unit grew 17%, aided by a gain in service revenue from Verra Mobility’s Government Solutions segment, which increased revenue 14%, largely due to the expansion of speed programs. Parking Solutions service revenue gained 10% on the strength of the company’s software as a service (SaaS) product offerings and various services related to parking management solutions.
Net income for Verra Mobility’s first quarter of 2023 reached $4.6 million, or $0.03 per share, based on 153.1 million diluted weighted average shares outstanding. For the comparable period of 2022, net income topped out at $10.0 million, or $0.06 per share, based on 160.7 million diluted weighted average shares outstanding. Adjusted EPS for the first quarter of 2023 was $0.26 per share, compared to $0.22 per share for the first quarter of 2022, the company reported.
Verra Mobility’s key business segments consist of:
- Commercial Services, offering automated toll and violations management, as well as title and registration solutions to rental car companies, fleet management companies and other large fleet owners.
- Government Solutions, delivering automated safety solutions to municipalities, school districts and government agencies, including services and technology that enable photo enforcement related to speed, red-light, school bus and city bus lane management.
- Parking Solutions, providing an integrated suite of software and hardware solutions to universities, municipalities, parking operators, health care facilities and transportation hubs in the United States and Canada.
Connell Chooses Non-Dividend-Paying Infrastructure Stock
Michelle Connell, president and owner of Dallas-based Portia Capital Management, said she likes the thesis behind Verra Mobility because the world has embraced travelling and seeking new adventures since the COVID-19 crisis has diminished from its peak. As a result, Verra Mobility will profit, Connell continued.
Michelle Connell heads Portia Capital Management.
Highlights of Verra Mobility cited by Connell included that 53% of the company’s revenues are regarded as governmental and 43% are commercial. Verra Mobility is placing transponders in cars owned by rental car corporations such as Avis, Hertz and Enterprise to track tolls to be paid and driving violations by their customers.
Another plus is that Verra Mobility covers 95% of the toll roads in the United States, as well as many internationally. The business produces lofty margins of about 65% earnings before interest, taxes, depreciation and amortization (EBITDA), Connell told me.
The company also benefits from a growing international trend for cashless tolls of roads, with 90% of its revenues reoccurring, Connell continued. She also added that Verra Mobility is in the process of paying down its debt, as well as buying back $100 million of its equity.
Connell estimated that Verra Mobility’s stock still has upside of 15-20% over the next 12 to 18 months. Since the stock is currently near its all-time high, Connell advised that prospective buyers of the stock stay patient to avoid overpaying for shares during short-term rallies.
Infrastructure Spending Is Increasingly Popular
In Maryland where I live, new Gov. Wes Moore signed into law an infrastructure spending bill on Monday, May 8, aimed at creating a pilot program in the state’s Department of Commerce. The program’s funds would cover certain costs for infrastructure projects in eligible technology sectors.
This legislation is the latest example of state and national governments around the world seeking to target development of key industries. This program will report by July 1, 2026, to the governor and the state’s legislature, known as the General Assembly, about the projects it funded and their economic impact.
CDC Reports Rising Vaccinations Against New Bivalent Variant of COVID-19
The COVID-19 pandemic’s public health emergency status in the U.S. expired on May 11, 2023, and the World Health Organization last week declared an end to what it began on January 30, 2020, to call the COVID-19 public health emergency of international concern, but the virus is still killing Americas each week and remains a public health threat. Even though death rates are dropping, Dr. Robert Anderson, the chief of the mortality statistics branch at the National Center for Health Statistics, said that COVID-19 deaths could top 100,000 in 2023.
The U.S. Centers for Disease Control and Prevention (CDC) reported at least one vaccination against COVID-19 and its bivalent variant has been given to 270,227,181 people, or 81.4%, of the U.S. population, as of May 10. Those who have completed the primary COVID-19 doses totaled 230,637,348 of the U.S. population, or 69.5%, according to the agency.
Also as of May 10, the United States had given a bivalent COVID-19 booster to 52,996,306 people who are age 18 and up, equaling 20.5% of America’s population. Medical studies have shown COVID-19 vaccinations help keep people healthy and reduce the morbidity from contracting the virus, potentially lifting confidence of consumers to encourage them to shop at stores, travel and otherwise spend money.
Russia’s War in Ukraine Remains a Fierce Firefight
Still posing a huge threat is Russia’s ongoing war in Ukraine. The latest news from the war zone indicates Russian soldiers and its Wagner mercenary group are continuing to battle in and around the Ukrainian city of Bakhmut as part of President Vladimir Putin’s reported plan to gain control and then advance to other cities in Ukraine’s industrial eastern region. However, some Russian soldiers reportedly fled their positions and lost valuable ground to Ukrainian forces, said Yevgeny Prigozhin, the private militia’s leader.
Despite Ukrainian President Volodymyr Zelensky talking publicly of delaying Ukraine’s expected spring counteroffensive, Prigozhin said it has begun and is proving to be “partially successful.” Nonetheless, Russia fired cruise missiles at the Ukrainian capital of Kyiv on Tuesday, May 9, as some of its troops participated in a parade across Moscow’s Red Square for the country’s annual celebration of victory in World War II.
The four dividend-paying infrastructure investments to purchase seem prepared to rise, despite economic uncertainty and ongoing political risk due amid Russia’s continuing invasion in Ukraine. With the need for tax-supported government projects such as roads, public utilities and municipal structures, companies that address those ongoing needs offer recession-resistant investments for those wary of economically cyclical stocks.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal omf Commerce, Crain Communications, Seeking Alpha, Guru Focus and other publications and websites. Paul can be followed on Twitter @PaulDykewicz, and is the editor and a columnist at StockInvestor.com and DividendInvestor.com. He also serves as editorial director of Eagle Financial Publications in Washington, D.C. In that role, he edits monthly investment newsletters, time-sensitive trading alerts, free weekly e-letters and other reports. Previously, Paul served as business editor and a columnist at Baltimore’s Daily Record newspaper and as a reporter at the Baltimore Business Journal. Plus, Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many other sports figures. To buy signed and specially dedicated copies, call 202-677-4457.
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