Australia’s Top 5 infrastructure companies

Australia’s infrastructure index has totally outperformed the overall ASX over the past year, returning 11.3% compared to just 0.6% for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) accumulation index.

There are several reasons for that, including their defensive attributes, above market yields as well as their diversity of mainly monopoly assets. There’s also the factor that these companies utilise large amounts of debt – currently available at very low interest rates – allowing them to juice up their returns.

In times of market volatility – owning shares in a company that you know is going to continue collecting tolls on its assets for many years or even decades into the future, can be a powerful factor and offset a plunge in other assets.

These are Australia’s top 5 infrastructure companies by traded value in the past month…

Transurban Group (ASX: TCL)

Transurban owns a network of toll roads around Australia, predominantly on the Eastern Coast, as well as 2 in the US. Recent acquisitions in Queensland will add to revenues and earnings over time. Distributions (dividends) have been growing and could surge higher – providing a better yield that the current 3.8% unfranked at today’s price of $12.11.

Sydney Airport Holdings Ltd (ASX: SYD)

Sydney Airport has also seen its share price soar thanks to investor demand – placing the yield at 3.9% at the current price of $7.15. Owning what could be the best monopoly asset in Australia, the company is also benefitting from strong tailwinds in rising passenger numbers, as well as having first dibs on operating Sydney’s second airport that is currently under development.

Spark Infrastructure Group (ASX: SKI)

An electricity distribution company, Spark has interests in two major distribution companies in Victoria and one in South Australia, as well as a 12% interest in another energy utility – DUET Group (ASX: DUE). The current yield of 3.9% at a share price of $2.46 again shows how in-demand the company’s assets are. Interestingly, activist investors think the company’s shares are worth more than $3 each – well above the current share price.

Macquarie Atlas Roads Limited (ASX: MQA)

Macquarie Atlas Roads owns a network of four toll road networks in Europe and the US. At the current share price of $5.38, the shares are yielding 3.5%, however, investors need to take a closer look before blindly plunging in – given some of the issues we highlighted last year. There’s also the potential for Brexit issues to have a negative impact on the company’s primary asset – a share in a network of toll roads in France.

Infigen Energy Ltd (ASX: IFN)

Infigen Energy owns and operates a number of renewable energy assets, mainly wind farms, but is also looking at getting into solar development. Infigen’s share price has risen strongly this year, up 145% since the beginning of January as the outlook improves. A number of energy retailers are expected to come up short when it comes to the 2020 Renewable Energy Target. As a result, many are likely to have to turn to companies like Infigen with existing renewable projects to cover their liabilities.

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Motley Fool writer/analyst Mike King owns shares in Sydney Airport. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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