Investors are always looking for the perfect balance between risk and reward. How much risk should you take to try to get the returns you want?
It can be a difficult investing tightrope to walk, which is why it makes sense to build a portfolio that mixes both safer and riskier shares. But perhaps there is one type of asset class that could provide the returns you want with a lot of safety too. That asset class could be infrastructure.
In my opinion the below three shares are some of the best listed infrastructure options on the ASX:
Sydney Airport Holdings Ltd (ASX: SYD)
Sydney Airport Holdings is the operator of Sydney's Kingston Airport and it has a market capitalisation of $13.6 billion.
Its passenger numbers have been steadily growing each month due to the increasing numbers of tourists arriving from Asia each year. In November 2016 the number of Chinese passengers increased by 20.1% compared to the same month last year.
Its share price had been at all time highs thanks to record low interest rates, but it has declined by 20% since 1 August 2016. I think this presents an attractive opportunity to buy integral Australian infrastructure.
It remains to be seen what will happen with the proposed second Sydney Airport, but there should be a decision by the end of this year.
Sydney Airport has a dividend yield of 5.16%.
Transurban Group (ASX: TCL)
Transurban is the operator of a number of tolls roads in Australia and the USA. It has a market capitalisation of $21 billion.
It's not uncommon to hear people whinge about how busy the roads are, which is where Transurban comes in. If Transurban provides roads that are quicker and better options than the alternatives then drivers will choose to travel on toll roads.
The number of cars on the road increases every year, this benefits Transurban with more potential customers.
Transurban has a dividend yield of 4.61%.
Magellan Infrastructure Fund (ASX: MIC)
This infrastructure fund is run by Magellan Financial Group Ltd (ASX: MFG) to give investors exposure to high-quality infrastructure all around the world.
It has a diverse array of holdings including water utilities, communications, distribution of power, energy infrastructure and rail assets.
It's diverse geographically too. As at 30 November 2016 around 31.8% of assets were in the USA, 27.6% in Europe, 20.2% in Asia Pacific, 8.3% in the UK, 5.1% in Canada and 2.1% in Latin America, with the remainder being cash.
This fund has a management and administration fee of 1.05% which isn't low, but quite good for the global diversification you receive.
Foolish takeaway
There is a fair chance that the share prices of all infrastructure stocks may continue to decline like they have been doing. However, this doesn't change the underlying asset, it only makes it cheaper and more attractive. Today may not be the best day to buy, but over the next few months if these companies get cheaper it could be time to pounce.
If you can't wait to buy a reliable dividend stock, you should look at our number one dividend pick right now.
