Investors looking for anchors in 2022 found them in infrastructure stocks.
These companies are portfolio workhorses, offering steady cash flows and consistent dividends. While they are also characterized by slow growth and unglamorous products, we always need what they sell: electricity, clean water, pipelines, highways, and airports.
Here are updates on two infrastructure funds. Both did better than broader markets last year although only one ended in positive territory.
BMO Global Infrastructure Index (TSX: ZGI)
Background: This ETF was among the first launched by Bank of Montreal in 2009. It is passively managed. The fund has $584 million in assets under management (AUM) with 93% of the holdings in Canada and the US.
Performance: The ETF rose 5% in 2022 and is modestly higher this year. The fund has an annualized dividend yield of 2.97% at its recent price of $45.43 and a management expense ratio of 0.61%.
The US (72%) and Canada (21%) account for most of the positions, with 5% of holdings in the UK. The largest asset is American Tower (10%), a Boston-based owner of wireless and broadcast communications infrastructure. Next are Canadian pipeline utility Enbridge (10%) and Crown Castle International, a US cell tower firm (9%).
Canadian pipeline operator TC Energy Corp. which a year ago was the third biggest holding has slipped to 7th spot.
This ETF is a conservative way to invest in Canadian and American firms that form the backbone of the North American economy.
iShares Global Infrastructure ETF (NDQ: IGF) All figures in US dollars.
Background:This ETF was launched in 2007 and holds 74 global stocks in the transportation, communication, water, and electricity services sectors. It has $3.9 billion in assets.
Performance: The fund was down 4% in 2022. It yields 2.55% at the current price of $48.52.
This ETF has not performed as well as the BMO fund because a higher proportion of its holdings are European. Drought affected hydro power generation and Russia’s invasion of the Ukraine raised the price of oil and natural gas need to generate power. The BMO fund, on the other hand, has a higher weighting of North American energy companies which have benefitted from rising energy prices.
Key metrics: This ETF is more globally diverse than the BMO Infrastructure fund with 52% of its holdings in Canada and the US versus 92% for the BMO fund. The leading sector weightings are utilities (41%), transportation (39%), and energy (20%). The top holdings, each with a 5% weighting, are Australia’s Transurban Group which owns and develops toll roads, electricity and power producer NextEra Energy, and Enbridge.
This ETF has more international exposure.