When an investor mentions ‘infrastructure’ companies on the ASX, one’s mind might turn to companies like Transurban Group (ASX: TCL), the famed tollroad operator. Or perhaps Sydney Airport Holdings Pty Ltd (ASX: SYD), the eponymous company behind Sydney’s sole international airport. Infrastructure companies have (or at least used to have) a reputation for being amongst the ‘safest’ investments on the ASX. Sure, you probably weren’t going to get yourself a 10-bagger in this sector, but you would get a steady, inflation-resistant stream of income.
However, like most sectors, the coronavirus pandemic has wreaked havoc on this sector, and by extension, this reputation. Transurban suddenly wasn’t too defensive when we all had to stay indoors for months earlier in the year, and working from home suddenly became necessary. And I’d wager we don’t need to discuss in detail the damage the pandemic has done to airports, as well as the entire travel sector.
That’s why this highly diversified infrastructure share might be worth a look today instead.
Enter Magellan Infrastructure Fund (ASX: MICH)
Magellan Infrastructure Fund is an infrastructure investment you might want to consider today if steady income and defensive investing is important to you and your portfolio. This fund isn’t a company, instead it is an ‘active exchange-traded fund (active ETF). This means that it is essentially a managed fund that you can buy units of on the ASX, just like any other ASX share, rather than having to go through the conventional ‘off-market’ transactions of a traditional managed fund.
This fund holds between 20 and 40 individual companies hailing from all around the world. A plurality of the holdings are US-listed (41%), but Europe, the Asia Pacific and Canada also feature heavily in the listings. These companies cover a range of sectors within infrastructure, including airports, toll roads, electricity and water utilities and communications. Incidentally, Transurban is a large holding in the fund, as of 30 September.
Since this fund’s inception, it has returned an average of 5.1% per annum. It compares favourably to the funds’ index benchmark (the S&P Global Infrastructure Index), which has returned an average of 1.3% per annum over the same period.
Over the past 12 months, Magellan Infrastructure Fund has paid out 11.7 cents per unit in dividend distributions. That gives this fund a trailing yield of 3.99% on current prices.
Is this fund a buy today?
The Motley Fool’s Dividend Investor service currently rates Magellan Infrastructure Fund as a ‘buy’. Ed Vesely and the team at Dividend Investor like this fund’s track record of beating its index, as well as the global diversification it brings to the table (not to mention the yield, of course).
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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Transurban Group. The Motley Fool Australia has recommended Magellan Infrastructure Fund. 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 Scott Phillips.
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