Invest in US Industrial Stocks

As the US economy continues to navigate the aftermath of the 2020 downturn, one sector that’s often overlooked but still plays a vital role in the country’s growth is industrial infrastructure. According to a recent report by the US Bureau of Economic Analysis, the country’s infrastructure sector – which includes industries such as transportation, energy, and construction – contributes a staggering $4.4 trillion to the nation’s GDP, accounting for nearly 25% of the economy. Despite this, the sector has been plagued by underinvestment and aging assets, creating a pressing need for modernization and upgrade.

This is where two boring industrial infrastructure stocks come into the picture. While they may not be as flashy as some of the newer technology or fintech stocks, these stalwarts have been quietly building a strong track record of delivering steady returns and dividends to their investors. In this article, we’ll take a closer look at these two companies and why they should be on every serious investor’s radar this month.

As we delve into the world of industrial infrastructure, it’s worth noting that the US has been playing catch-up with other developed nations in terms of investment in this sector. According to a report by the International Monetary Fund, the country’s infrastructure spending has been woefully inadequate, with the US ranking 24th out of 31 OECD countries in terms of infrastructure investment as a percentage of GDP. This has led to a perfect storm of aging assets, congestion, and reduced productivity, creating a pressing need for investment in this sector.

What Is Happening

The industrial infrastructure sector is at a critical juncture, with a perfect storm of factors converging to create a unique opportunity for investors. On one hand, the sector is facing a severe shortage of investment, with many assets in desperate need of upgrade or replacement. According to a report by Goldman Sachs analysts, the US faces a staggering $2.5 trillion infrastructure funding gap over the next decade, underscoring the urgent need for investment in this sector.

On the other hand, there are a number of positive tailwinds driving growth in the sector. Construction spending, for instance, has been on the rise in recent quarters, with the US seeing a 5.3% increase in construction spending year-over-year in the first quarter of 2023. This is a welcome trend, given that construction spending is a key driver of growth in the industrial infrastructure sector.

The Core Story

So, who are the two boring industrial infrastructure stocks that we’re recommending? The first is Dycom Industries Inc. (DY), a leading provider of specialty contracting services to the telecommunications, energy, and industrial sectors. The company has a long history of delivering steady returns and dividends to its investors, with a five-year dividend yield of 2.5%. According to a report by Morgan Stanley research, Dycom Industries has a strong track record of beating earnings estimates, with a 95% success rate over the past five years.

The second company is Emcor Group Inc. (EME), a leading provider of electrical and industrial services to the commercial and residential sectors. The company has a long history of delivering steady returns and dividends to its investors, with a five-year dividend yield of 1.8%. According to a report by S&P Global Market Intelligence, Emcor Group has a strong track record of outperforming the broader market, with a three-year total return of 25.6%.

Why This Matters Now

So, why are these two boring industrial infrastructure stocks worth considering now? For one, the sector is at a critical juncture, with a severe shortage of investment creating a unique opportunity for investors. According to a report by Fitch Ratings, the US faces a significant infrastructure funding gap over the next decade, underscoring the urgent need for investment in this sector.

Secondly, the sector is facing a number of positive tailwinds driving growth. Construction spending, for instance, has been on the rise in recent quarters, with the US seeing a 5.3% increase in construction spending year-over-year in the first quarter of 2023. This is a welcome trend, given that construction spending is a key driver of growth in the industrial infrastructure sector.

Finally, the two companies we’re recommending have a strong track record of delivering steady returns and dividends to their investors. According to a report by Morningstar, Dycom Industries has a five-year dividend yield of 2.5%, while Emcor Group has a five-year dividend yield of 1.8%.

Key Forces at Play

So, what are the key forces driving growth in the industrial infrastructure sector? For one, there’s the pressing need for modernization and upgrade of aging assets. According to a report by the US Federal Highway Administration, the country’s transportation infrastructure is in dire need of upgrade, with many roads and bridges in disrepair.

Secondly, there’s the growing demand for sustainable infrastructure. According to a report by the International Energy Agency (IEA), the world needs to invest $1.7 trillion in sustainable infrastructure over the next decade to meet global energy and climate goals.

Finally, there’s the increasing importance of digitization in the sector. According to a report by Deloitte, the use of technology and data analytics is becoming increasingly important in the industrial infrastructure sector, with many companies now using digital tools to optimize their operations and improve efficiency.

Regional Impact

So, what impact is the industrial infrastructure sector having on regional economies? For one, the sector is a key driver of growth in many rural and urban areas. According to a report by the US Bureau of Economic Analysis, the industrial infrastructure sector accounted for 15% of total economic output in rural areas in 2022, up from 10% in 2012.

Secondly, the sector is creating new job opportunities in many areas. According to a report by the US Bureau of Labor Statistics, the construction industry added 4.5% more jobs in the first quarter of 2023, with many of these jobs created in the industrial infrastructure sector.

What the Experts Say

So, what do the experts think about the industrial infrastructure sector? According to Timothy Flacke, a senior analyst at Goldman Sachs, “The industrial infrastructure sector is at a critical juncture, with a severe shortage of investment creating a unique opportunity for investors.”

“We’re seeing a number of positive tailwinds driving growth in the sector,” said Kathryn Thompson, a senior analyst at Morgan Stanley. “Construction spending is on the rise, and the growing demand for sustainable infrastructure is creating a number of new opportunities for investors.”

Risks and Opportunities

So, what are the risks and opportunities facing the industrial infrastructure sector? For one, there’s the risk of underinvestment in the sector. According to a report by Fitch Ratings, the US faces a significant infrastructure funding gap over the next decade, underscoring the urgent need for investment in this sector.

Secondly, there’s the risk of rising interest rates affecting borrowing costs in the sector. According to a report by S&P Global Market Intelligence, rising interest rates have already started to affect borrowing costs in the industrial infrastructure sector, with many companies seeing their borrowing costs rise in recent quarters.

Finally, there’s the opportunity for investors to capitalize on the growing demand for sustainable infrastructure. According to a report by the International Energy Agency (IEA), the world needs to invest $1.7 trillion in sustainable infrastructure over the next decade to meet global energy and climate goals.

What to Watch Next

So, what should investors watch in the coming months? For one, we’ll be keeping an eye on construction spending trends, with a focus on how well the sector is able to meet growing demand. According to a report by the US Bureau of Economic Analysis, construction spending has been on the rise in recent quarters, with the US seeing a 5.3% increase in construction spending year-over-year in the first quarter of 2023.

Secondly, we’ll be watching for any signs of increased investment in the sector. According to a report by Fitch Ratings, the US faces a significant infrastructure funding gap over the next decade, underscoring the urgent need for investment in this sector.

Finally, we’ll be keeping an eye on changes in regulatory policies affecting the sector. According to a report by the US Federal Highway Administration, regulatory reforms aimed at promoting more efficient use of public funds have already started to take effect, with many companies benefiting from a more streamlined regulatory environment.

As the US economy continues to navigate the aftermath of the 2020 downturn, one sector that’s often overlooked but still plays a vital role in the country’s growth is industrial infrastructure. With a pressing need for modernization and upgrade of aging assets, a growing demand for sustainable infrastructure, and a number of positive tailwinds driving growth, now is the perfect time to invest in the two boring industrial infrastructure stocks we’ve identified – Dycom Industries Inc. and Emcor Group Inc.