Infrastructure in the form of bridges, roads, communications lines, railways and other physical assets form the backbone of the economy.
Increasingly, clean energy infrastructure is taking center stage as the global economy weans itself from reliance on fossil fuels. According to the World Bank, the energy sector had the largest share of private sector participation in infrastructure projects in the first half of 2023 for the first time in recent years, with 99% of new energy projects focused on renewable sources.
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The U.S. has embarked on a big infrastructure improvement push, and according to Global X analyst Madeline Ruid, the outlook for infrastructure spending is benefiting from an increase in public and private funding related to the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act.
“Policy efforts to accelerate the clean energy transition and bolster the U.S. manufacturing landscape are creating strong tailwinds for U.S. infrastructure development,” she says. “Hundreds of billions are likely to be injected into the U.S. infrastructure space over the next several years, creating significant potential opportunities for companies across the infrastructure value chain.”
With that in mind, here’s a look at seven top infrastructure stocks for investors to consider in 2024:
| Infrastructure Stock | Forward dividend yield | Market Capitalization | YTD return as of Feb. 15 |
| Eaton Corp. (ticker: ETN) | 1.3% | $110.6 billion | 14.5% |
| United Rentals Inc. (URI) | 1% | $44.1 billion | 15.6% |
| Martin Marietta Materials Inc. (MLM) | 0.6% | $33.7 billion | 7.4% |
| Parker-Hannifin Corp. (PH) | 1.1% | $67.5 billion | 13.6% |
| Quanta Services Inc. (PWR) | 0.2% | $30.9 billion | -0.8%* |
| Caterpillar Inc. (CAT) | 1.6% | $166.3 billion | 9.8% |
| American Tower Corp. (AMT) | 3.6% | $87.1 billion | -12.2% |
*PWR stock is up 37.5% in the past 12 months.
Eaton Corp. (ETN)
This multinational company is the top holding in the Global X U.S. Infrastructure Development ETF (PAVE). It sells products and services that help manage electrical, hydraulic and mechanical power.
In an earnings presentation earlier this month, Eaton said that in 2023, mega-project announcements in North America increased by $415 billion from the previous year. The company said that North American mega-project announcements have totaled $933 billion in the past three years.
“Less than 20% of these projects have started construction, meaning that companies like Eaton Corp. still have opportunities to potentially capture growth from these projects,” Ruid says.
United Rentals Inc. (URI)
This industrial and construction equipment rental company sits as the No. 2 holding in the PAVE ETF, and like Eaton, it is considered one of the top infrastructure stocks.
“The top holdings in PAVE reflect the range of products and services that are essential to driving forward U.S. infrastructure activity,” Ruid says. “For example, United Rentals is the world’s largest rental equipment provider for heavy machinery.”
The company had a record-setting fourth quarter, which according to Ruid was “aided by solid year-over-year growth from customers developing projects such as battery manufacturing plants, semiconductor-related sites, data centers and power infrastructure, along with other infrastructure.”
Martin Marietta Materials Inc. (MLM)
This building materials supplier sells cement, concrete and asphalt as well as aggregates consisting of crushed stone, sand and gravel, making it a prime candidate for any infrastructure stocks list.
That includes a list of infrastructure stocks provided by Todd Shaffer, senior manager of research at VectorVest, a stock analysis and education firm. “For bullish candidates, we want to favor companies that are in rising price trends, are profitable, and forecast to grow those earnings faster than the combined rates of inflation and interest rates,” Shaffer says.
That’s true for Martin Marietta and the next three stocks, as well as Eaton and United Rentals, Shaffer says. “Each of these candidates has positive sales growth and pays dividends,” he says.
But no stock comes without risk.
“These candidates will struggle if commodity prices and interest rates rise, putting a squeeze on profit margins,” he says.
Based on numbers from mid-January, Shaffer says Martin Marietta had a 12-month earnings forecast to grow 20% on sales growth of 10%.
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Parker-Hannifin Corp. (PH)
This diversified industrial conglomerate sells motion-control technologies for applications including hydraulics and pneumatics, and fluid and gas handling and sealing.
“Parker says about 85% of the revenue from these technologies has intellectual property protection, which we believe helps cement its competitive position, given the long product lifecycles and low reinvestment needs of this business,” Morningstar analyst Spencer Liberman wrote recently.
According to Shaffer, as of Jan. 18, the company had a 12-month earnings forecast to grow 23% on sales growth of 15%.
Quanta Services Inc. (PWR)
This company designs, installs, repairs and maintains energy and communications infrastructure for the utility, renewable energy, communications, pipeline and energy industries.
Quanta had a third quarter that set records across multiple metrics on strength in its electric power and renewable infrastructure segments. It said its total backlog rose above $30 billion for the first time, and it raised its full-year 2023 expectations for sales and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA.
“Utility customers’ multiyear capex plans remain strong, driven by grid modernization and security, system hardening initiatives, electric vehicle adoption, load growth and federal and state policy designed to accelerate the energy transition,” according to a company presentation.
Quanta says achieving carbon reduction goals and implementation of the Inflation Reduction Act will require substantial, incremental investments in renewable generation, transmission and substation infrastructure.
According to Shaffer, as of Jan. 18, the company had a 12-month earnings forecast to grow 20% on sales growth of 26%.
Caterpillar Inc. (CAT)
This company makes construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
Its construction equipment is sure to play a role in the modernization of the nation’s infrastructure.
This month, the company said it had a record $67.1 billion in sales and revenues for 2023 based in part on its ability to receive the prices it set for its products. Caterpillar also attributed the record to higher sales of equipment to end users.
According to Shaffer, as of Jan. 18, the company had a 12-month earnings forecast to grow 22% on sales growth of 12%.
American Tower Corp. (AMT)
The nation’s infrastructure buildout isn’t all about roads, bridges and tunnels. It’s also about trying to boost communications coverage, especially in rural areas.
This company provides towers where it leases space to wireless communications tenants. It can host multiple tenants on a single tower.
The company has more than 40,000 tower sites in the U.S., with many in suburban and rural areas, giving it a springboard from which to capitalize on the push to deliver broadband service in more remote areas.
The company also has a broad footprint outside North America, so its growth trajectory isn’t solely predicated on expansion in the U.S.
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7 Best Infrastructure Stocks to Buy Now originally appeared on usnews.com
Update 02/16/24: This story was previously published at an earlier date and has been updated with new information.
