Good luck if you find yourself driving through “Malfunction Junction.”
Here in my home state of South Carolina, that’s a stretch of highway just west of Columbia where interstates 20, 26 and 126 converge. It’s notorious for heavy traffic and dangerous merges which result in frequent fender benders.
They’re finally fixing it.
For decades, Malfunction Junction needed an overhaul. But it wasn’t until 2015 that planning finally started. It took until 2020 to line up funding and get the green light from all the agencies involved.
But then inflation sent the price tag soaring higher and the project was further delayed. It’s now estimated to cost more than $2 billion and will be the most expensive infrastructure improvement project the state has ever attempted.
Thankfully, the Infrastructure Investment and Jobs Act (IIJA) finally awarded enough money to get construction started this past summer. The first two phases (out of five) are well underway and the most important upgrades to the interstate are scheduled to start next year.
Here at Intelligent Income Daily, we’re focused on finding the safest income investments on the market. When the government is determined to spend tons of money, we take notice… And try to get a piece of the action by profiting from companies that will benefit from the increased spending.
Today I want to tell you why we’re about to see a tidal wave of government money flowing into local construction projects all around the country. I’ll also share one quick way to invest in a sector that is likely to see outsized benefits from all this spending.
Billions Yet to Be Spent
Do you remember the infrastructure bill? Congress and the president passed it in late 2021 after plenty of squabbling over how much money should be spent. The final version of the law added $550 billion in new federal spending over five years.
It allocated some of the major buckets of money toward roads and bridges ($110 billion), railroads ($66 billion), power infrastructure ($65 billion), high speed internet ($65 billion), and water infrastructure ($55 billion).
So far, $185 billion in funding has officially been announced for 2022 and 2023.
But that doesn’t mean the money has actually been spent yet. Many projects are still in the planning stages, before construction begins.
On top of that, certain types of projects are getting funds more quickly. In fact, most of the money distributed so far has been for roads, bridges, and airports. That’s because they are already covered by pre-existing “formula grants.”
Other types of projects have to go through a competitive bidding process, which takes months to finalize.
In fact, many of the companies providing machinery, construction, and engineering services are only just starting to see funds from the infrastructure bill affecting demand for their products and services.
Construction company Jacobs Solutions (J) said at a recent conference that IIJA’s money is just starting to come into play, with spending expected to ramp up in the second half of 2023.
Construction crews are about to get busier than ever.
And the best income-generating way to play the coming influx of government spending is not the companies that will be building everything… But the ones that will own and operate everything.
Profit from the Construction Essentials
Now, nobody can really profit from roads and bridges – those are free public infrastructure projects that reduce transportation costs for everyone.
But utilities stand to gain lots of funding for projects that will help them make money for years to come.
Remember, a huge chunk of the infrastructure funding is going to power and water infrastructure. And most of that money hasn’t even started moving yet. Plus, aside from the infrastructure bill, there’s also the Inflation Reduction Act, which passed last year and adds even more money for clean energy projects.
Utilities are set to shine. In a recessionary environment, they have resilient revenues. According to Ciovacco Capital Management, back in the Great Financial Crisis of 2007-2009, when the S&P 500 fell 50%… Eighteen of the top utility companies only fell an average 30%.
That still may not seem great but consider the best part about utilities: Their stocks often pay a dividend. That’s why many income-focused investors turn to them during market downturns. So even if the market is facing volatility, you can continue earning income.
And right now – as we face another potential recession – utility companies are about to get an influx of money from the government to help build all sorts of infrastructure.
One quick way to invest in utilities is through the Utilities Select Sector SPDR ETF (XLU). This ETF holds a basket of 30 utility companies providing electric, gas, and water services. These include names like NextEra Energy Inc., Southern Company, Duke Energy Corporation, Sempra Energy, American Electric Power Company Inc., and more.
The weighted average market cap of XLU is over $56 million. And I believe this sector will grow exponentially when the government money hits all the areas these utilities serve.
You can find even more picks that are due to profit in this market environment in Intelligent Income Investor. This premium service provides a model portfolio of the highest-quality dividend-paying companies the market has to offer.
Our focus is on finding safe dividends to create a growing income stream through bull and bear markets. And utility companies are just the start… To find out more, click here.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily