There has been plenty of hype surrounding infrastructure stocks, even before the Senate approved the colossal bipartisan infrastructure bill in August. Ever since President Joe Biden took office, his administration has put forth massive spending plans for rebuilding America’s crumbling infrastructure. Hence, there’s a lot of optimism surrounding infrastructure stocks at this time.
The bill includes $550 billion in federal investments in America’s infrastructure over the next five years. It includes $110 billion for developing new and improving existing highways, roads, bridges, and related projects. Moreover, it also includes substantial investments in upgrading broadband networks, airports, ports, and waterways. On top of that, the bill also allocates $7.5 billion for electric buses and ferries.
Construction spending had been steadily rising in the lead up towards the approval of the bill. Therefore some companies are already making tons of money, and the higher federal spending could be a major growth catalyst as we advance.
Let’s look at seven of the top infrastructure stocks to buy and hold this year and beyond.
- Nucor (NYSE:NUE)
- Autodesk (NASDAQ:ADSK)
- American Tower (NYSE:AMT)
- Vulcan Materials (NYSE:VMC)
- Mueller Water Products (NYSE:MWA)
- Broadwind (NASDAQ:BWEN)
- Caterpillar (NYSE:CAT)
Infrastructure Stocks To Buy: Nucor (NUE)
Nucor is perhaps a no-brainer to buy ahead of an infrastructure bill, considering that it’s the largest steel manufacturer in the United States. The North Carolina-based steel giant is also the largest steel recycler in the North American region, with most of its production output coming from scrap. Therefore, it has a massive competitive advantage in terms of cost. Moreover, NUE stock is a dividend aristocrat in its sector, having increased its dividend payouts for 48 consecutive years.
The company reported two consecutive quarters of record earnings and is expected to put on a solid showing in the third quarter. Projected earnings are expected to rise 46% on a sequential basis. Nucor is making the most of the surge in demand for steel which has sent prices of U.S. hot-rolled coil to new highs.
Moreover, Nucor has recently been on an acquisition spree, acquiring steel racking manufacturer Hannibal Industries and the insulated metal panels segment of Cornerstone Building Brands business. Hence, it’s in an incredible position to push on and take advantage of the tailwinds.
Autodesk (ADSK)
Seeing Autodesk in an infrastructure stock to buy list may be surprising to some. However, the company has been the go-to software provider for computer-aided design (CAD) for architects and engineers for several years now.
The novel coronavirus pandemic has spurred a digital transformation across various sectors, which has hugely benefited ADSK stock. For instance, its building information modeling software, BIM Collaborate Pro, has witnessed a sizeable increase in the projects initiated by its subscribers.
Moreover, subscriptions for its manufacturing software, Fusion 360, have shot up by 53% in the past three years.
During the first half of the year, the company’s total billings surged 19% to $2.1 million. Additionally, gross margins were at 91%, with free cash flows rising by 35% to $500 million. Combine these numbers with Biden’s massive infrastructure plan, and you’re looking at a surefire winner.
Infrastructure Stocks To Buy: American Tower (AMT)
Boston-based real estate investment trust (REIT) American Tower owns more than 214,000 communication sites in the U.S. and globally. The infrastructure bill includes $65 billion in improving internet access and bolstering the availability of 5G internet.
Though AMT stock has moved sluggishly in the past few months, it is likely to pick up the pace in the latter half of the year.
The company has performed incredibly from a financial standpoint. In the past three years, its average funds from operations growth have averaged over 8%, which steamrolls the sector median of 1.5%.
Moreover, it has raised its dividend for the past nine years. Its annual dividend is $5.24 with a payout ratio of over 50% for a 2% yield.
Vulcan Materials (VMC)
Vulcan Materials is one of the top producers of construction aggregates in the United States.
It has four main lines of business, including aggregates, concrete, calcium, and asphalt. Its aggregates division provides materials for building and repairing highways, while its asphalt business caters to road construction. Concrete feeds into the construction in general, while calcium is used for a variety of purposes. Hence, VMC stock is an obvious play into the highways and road construction portion of the infrastructure bill.
Furthermore, the company is also tapping into the housing boom in the country. There is a healthy surge in the prices of houses leading to additional houses being built to satisfy the demand.
The combination of public and private spending will significantly increase the demand for its products and boost VMC stock.
Infrastructure Stocks To Buy: Mueller Water Products (MWA)
Mueller Water Products is a small-cap company that produces products used to distribute water in the United States. Its products ensure that the water is distributed efficiently and is uncontaminated in the process. Moreover, its technology segment provides leak detection services, water meters, and other related services.
The company has a massive growth runway ahead, considering the past neglect of the domestic water infrastructure. Additionally, MWA stock is likely to gain as part of the hugely popular market theme of environmental, social and governance (ESG) investing.
Water stocks such as Xylem (NYSE:XYL) have been on phenomenal runs in the past few months, pointing to an exciting future for MWA stock.
Broadwind (BWEN)
Broadwind is an independent manufacturer that sells components, equipment, and structures to various industries. It develops key components that go into wind turbines and supplies extensive wind towers in the North American region.
After a few rough quarters, it is now looking to cash-in on the favorable tailwinds and returns to winning ways. Moreover, BWEN stock is trading at lower than 1x forward sales, making it an exciting value play.
The company recently announced it had received over $12 million in new tower orders in the third quarter. Moreover, it expects a sequential order growth of 50% in the period, due to higher activity levels.
It stayed its course during the pandemic, and now with the surge in industrial demand and investments in green energy, Broadwind will benefit in the long term.
Infrastructure Stocks To Buy: Caterpillar (CAT)
Caterpillar’s distinctive yellow and black machinery is a staple across most construction sites across the country. The Illinois-based company is long a mainstay in the manufacture of heavy equipment used to build and repair highways, roads and other infrastructure.
CAT stock has built up a solid reputation as a dividend king in its sector, having raised its dividend in each of the last 18 years.
Furthermore, free cash flows from its core machinery, energy, and transportation (ME&T) business are set to grow at an impressive pace through 2026. It expects them to grow from the $1 billion to $6 billion range to $4 billion to $8 billion during the period.
Moreover, from a fundamentals perspective, top and bottom-line growth have been solid, and it is likely to push forward in the coming years.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.