AAccording to data from Johns Hopkins, new cases of COVID-19 in China hit a record high of 447,104 between February 28 and March 6. The numbers have since declined, but the seven-day average of new daily COVID-19 cases in China remains higher than at any time in 2020.
In the United States, fears of a COVID-19 omicron BA.2 subvariant are growing, although a surge remains unlikely at this time.
Investors looking for companies that can win in the long run even as COVID-19 cases increase are in the right place. Here is what makes iShares Global Infrastructure ETF (NASDAQ:IGF), American hydraulic works (NYSE:AWK)and Kinder Morgan (NYSE: KMI) three excellent dividend investments worth considering right now.
There is no slack in demand for infrastructure investment
Lee Samaha (iShares Global Infrastructure ETF): Although the pandemic and geopolitical events may delay investment in many industries in the short term, there is no denying the megatrend towards global infrastructure investment. In the developed world, there is an urgent need to replace and upgrade existing infrastructure, a fact highlighted by the US infrastructure bill. Meanwhile, the developing world needs infrastructure investment to support economic growth.
Whether it is airports, ports, transportation infrastructure, utilities, energy infrastructure, water and wastewater treatment, or even parks and schools, it is certain that global infrastructure spending will increase for many years to come.
This is where the iShares Global Infrastructure ETF (exchange-traded fund) comes in. I particularly like this ETF because it seems to do what it says it will do. In other words, focus on real infrastructure companies such as energy pipeline companies, airport operators and toll road providers. Thus, ETF managers avoided the temptation to pick winners in the infrastructure sector or invest in companies that are not core infrastructure businesses.
The iShares Global Infrastructure ETF gives you a chance to invest in global infrastructure while enjoying a 2.7% return while you wait. If you’re going to play the theme, this ETF is the best way to get direct exposure.
Bathe your wallet with a boring and basic source of passive income
Scott Levine (American Water Works): Feel disturbed to hear that China is instituting lockdowns in various cities to stem the spread of the new variant of COVID-19? You’re not alone. For millions of people, daily activities resume as before the start of the pandemic; however, the threat of a new COVID-19 variant can change that in a flash. And with it, market volatility would surely ensue. For those worried about the prospect of wild market swings, fortifying their portfolios with a conservative dividend stock like American Water Works is a strong decision to make.
Providing water and sanitation services to more than 14 million people in 24 states, American Water Works operates primarily in regulated markets. In each of the past three years, for example, the company has generated 86% of its operating revenue from its activities in regulated markets. Operating in this way gives the company a clear view of future cash flows, allowing it to plan acquisitions of small, municipally-run water utilities as well as the replacement and upgrade of aging infrastructure accordingly.
Granted, the eyes of high-yield dividend seekers may not light up when they see the 1.54% forward dividend yield offered by American Water Works stock, but the commitment to the management to reward the shareholders makes the action interesting. From 2016 to 2021, management increased the dividend at a compound annual growth rate of 10%. Going forward, investors will find that management plans to increase the payout at a similar pace, planning to increase the dividend at a compound annual growth rate of 7% to 10% from 2022 to 2026.
Do you think these dividend increases will put the company in hot water? Think again. During American Water Works’ third quarter 2021 conference call, CEO and CFO Susan Hardwick said management is “reducing our long-term payout target range to 55% to 60%, which will allow us to fund our significant regulated investment plan, fund our dividend growth strategy, and maintain a healthy balance sheet.”
A stable company with a high return
Daniel Foelber (Kinder Morgan): Like buying shares of an ETF or investing in American Water Works, pipeline giant Kinder Morgan is about as boring of a company as you can get. However, investing is not a beauty contest. Rather, it’s about finding quality companies that are undervalued or have growth potential. And while Kinder Morgan may not have much growth, there’s reason to believe its business is undervalued even after the stock’s 20% year-to-date rise.
Kinder Morgan is one of the largest energy infrastructure companies in North America. Its business is tied to stable, long-term, fixed-price contracts that protect it from volatile fluctuations in oil and natural gas prices, but also limit the upside potential in the event of oil and gas price spikes. This dynamic makes Kinder Morgan a relatively safe energy stock that has fared much better in 2020 (when oil and gas prices were crashing) compared to other oil and gas companies. But it also means Kinder Morgan is likely to underperform the oil and gas industry when prices rise (like in 2022).
Despite its short to medium-term stability, Kinder Morgan depends on the long-term suitability of natural gas, and to a lesser extent oil, to benefit from favorable terms when contracts are renewed. Therefore, Kinder Morgan enjoys higher demand for domestic consumption, as well as export potential.
Given the unfolding geopolitical risks, it is safe to say that much of the world is now more interested than ever in importing liquefied natural gas (LNG) from the United States in order to reduce dependence on -Vis to nearby onshore pipelines. The need to increase LNG exports is a boon to Kinder Morgan’s business. So there are definitely benefits there.
Meanwhile, Kinder Morgan has proven it can generate stable cash flow in good times and bad, which supports a growing dividend. With a yield of 5.9%, Kinder Morgan is too good a value to pass up.
10 stocks we prefer to American Water Works
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Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in the stocks mentioned. Scott Levine has no position in the stocks mentioned. The Motley Fool owns and recommends Kinder Morgan. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.