The Great Debate Part 2: Hydropower Infrastructure

Rachel Gearhart By Rachel Gearhart, Managing Editor, The Oxford Club

Commodities

Here’s the deal. If Trump cuts renewable subsidies (which he has vowed to do), companies that own hydropower could take a beating.

But hydropower’s claim to renewable subsidies isn’t the only headwind facing your portfolio.

Earlier this week, I told you about my visit to Conowingo Dam. As soon as I arrived on the nearly 90-year-old property, it was clear…

Infrastructure is a huge concern for hydroelectric dams.

And it’s a huge concern for our nation as a whole. That’s
probably why infrastructure spending was the only thing Donald Trump and Hillary Clinton agreed on during their campaigns.

In fact, Trump recently proposed a $1 trillion infrastructure plan.

It sounds like a lot of money. But it won’t even cover a third of America’s infrastructure needs…

Every four years, the American Society of Civil Engineers grades America’s infrastructure. In 2013, America’s grade was a bleak D+. The estimated cost to solve the problem is $3.6 trillion.

The 84,000 dams in the U.S. received a D. It’s not surprising. After all, they have an average age of 52 years.

More than 14,000 – including Conowingo – are considered high-hazard dams. That means the failure or misoperation of these dams would cause loss of life and significant economic losses. And each year, that number increases.

According to the Association of State Dam Safety Officials, it would cost $21 billion to repair them.

How did it get this bad?

public-infrastructure-spending

Despite an increasing population (and increasing infrastructure needs), federal spending on infrastructure has remained flat for more than 35 years. Clearly it’s not a budget item that wins the hearts of voters.

But with Trump about to take office and initiate his $1 trillion infrastructure spending plan, this could all change very soon.

As investors, infrastructure spending is worth paying attention to. After all, those 14,000 dams aren’t going to fix themselves. No, major publicly traded companies are going to do the work – pocketing the $21 billion repair bill.

That’s why I went to Energy and Infrastructure Strategist David Fessler for his opinion on how to play America’s crumbling infrastructure.

He recommends VanEck Vectors High Income Infrastructure MLP (NYSE: YMLI).

According to Dave, the partnership is completely focused on repairing and building U.S. infrastructure. It also pays a solid dividend yield of 7.84%.

“A bet on this MLP fund,” says Dave, “is a bet that infrastructure spending will rise over the coming years.”

And there’s no doubt it will…

While Trump’s $1 trillion plan will fall short of the $3.6 trillion America needs, it’s a good start.

In the week following the election, the VanEck MLP went up 5.7%. It has since settled lower, creating a perfect buying opportunity.

vaneck-income-mlp

Once Trump’s infrastructure spending kicks in, expect this fund – as well as other construction and infrastructure stocks – to soar.

Good investing,

Rachel

P.S. In the January issue of Oxford Resource Explorer, Dave will reveal the specific companies he believes will profit the most from the boom in infrastructure spending. To make sure you receive the issue, click here to subscribe now.