Making its debut on Wednesday, the Guggenheim S&P High Income Infrastructure ETF (GHII) offers exposure to infrastructure assets, which provide essential services to economies around the world. By their nature, infrastructure assets operate in an environment of limited competition as a result of natural monopolies, government regulations or concessions. Consequently, these companies rake in substantial and stable cash flows, which are then returned to shareholders via dividends.
For investors looking to boost current income, while at the same time maintaining a relatively low risk profile, this corner of the market may be a compelling buy. Distribution yields in the seven existing infrastructure-focused ETFs (excluding the new Guggenheim fund) range from 0.27 percent to more than 8 percent, and the three largest funds carry yields in the low 3 percent range.
GHII tracks an index that is designed to measure and monitor the performance of 50 high-yielding global equity securities of companies that engage in various infrastructure-related sub-industries, such as the energy, transportation, and utilities sectors.
To be included in the index, constituents must meet size, listing and liquidity requirements, as well as be part of the S&P Global BMI Index, which is a rules-based index that measures global stock market performance.
Unlike most ETFs, GHII’s underlying index weights its components based on a 12-month trailing dividend yield instead of by market capitalization. Roughly half of the portfolio's total assets are allocated to utilities, followed by industrials (about 30%) and energy (approximately 16%).
In terms of geographic diversity, GHII’s biggest country allocations comprise the U.S. (20%); Australia (14%); China (9%); Spain (8%) and Italy (8%).
Equities from Great Britain, Canada, Singapore, and France also have meaningful allocations.
The S&P High Income Infrastructure ETF charges an expense ratio of 0.45%.
Daniela Pylypczak-Wasylyszyn writes for ETFdb, which offers a comprehensive and original ETF database and analytical consulting services for advisors and investors, as well as a free newsletter. Learn more about their services by visiting ETFdb.com. Disclosure: the author had no positions in the securities named in this article at the time of writing.