What are we looking for?
Sustainable dividends from global infrastructure spending.
The screen
Retail investors on the hunt for high yields have company – deep-pocketed company – that includes pension, sovereign and private-equity funds. Those top players, in fact, have a big edge given their access to private infrastructure projects such as airports and toll roads.
Those holdings can be highly profitable – SNC-Lavalin Group Inc. has, for example, won great returns from its stake in Ontario’s 407 toll highway. On top of that, private infrastructure is relatively low risk, with governments often ensuring they run smoothly with revenue-supporting guarantees.
Retail investors can’t typically buy into infrastructure directly – but they can piggyback on some big investors.
Our search started with dividend-paying companies and exchange-traded funds focused on top infrastructure. We then applied our TSI Dividend Sustainability Rating System, which awards points based on key factors:
- One point for five years of continual dividend payments – two points for more than five;
- Two points if it has raised the payment in the past five years;
- One point for management’s commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to foreign currency rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
- One point if the company is an industry leader.
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated two stocks and three ETFs. Global holdings for Brookfield Infrastructure Partners LP run the gamut from power lines to data centres. Macquarie Infrastructure Corp. focuses on bulk-liquid terminals and airports. The iShares Global Infrastructure ETF and the SPDR S&P Global Infrastructure ETF both offer low-fee ways to invest in transportation, communications and power infrastructure stocks. Likewise, the Invesco S&P High Income Infrastructure ETF holds high-yield infrastructure stocks.
We advise investors to do additional research on any investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
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Scott Clayton