Ferrovial's Highways Division: A High-Conviction Buy in the Infrastructure Sector

In an era where global infrastructure demand is surging due to population growth, urbanization, and climate resilience needs, Ferrovial's Highways Division stands out as a rare combination of high-margin, inflation-protected cash flow generators and strategic value creation. With a 14.4% year-on-year revenue increase in the first nine months of 2025 and a €1.5 billion dividend pipeline from its Canadian 407 ETR toll road, the division is not just surviving-it's thriving in a volatile macroeconomic environment. For investors seeking long-term, defensive exposure to infrastructure, Ferrovial's highways business offers a compelling case.

North America: The Engine of Growth

Ferrovial's North American operations have emerged as the division's crown jewel, contributing €312 million in dividends to the parent company during the period, according to a Ferrovial press release. This outperformance is driven by dynamic toll pricing and traffic growth on key assets such as the North Tarrant Express, LBJ Express, and I-66 Outside the Beltway. For instance, the U.S. highway assets generated €342 million in revenue for Q3 2025, a 7% year-on-year increase, according to an S&P Global report. These toll roads benefit from structural demand, as urban congestion and e-commerce-driven freight movements ensure consistent traffic volumes.

The strategic use of variable pricing models-adjusting tolls in real time based on demand-has further amplified margins. This approach not only stabilizes cash flows but also creates a natural hedge against inflation, as toll rates can be incrementally raised to offset cost pressures. According to the S&P Global report, Ferrovial's North American toll roads are "among the most operationally efficient in the sector, with EBITDA margins consistently above 80%."

407 ETR: A Dividend Powerhouse

The 407 ETR, Canada's largest electronic toll road, has cemented its status as a cash flow engine. Despite facing the Schedule 22 payment expense-a regulatory obligation-its EBITDA grew by double digits in 2025, fueled by successful commercial campaigns and traffic recovery, according to the Ferrovial press release. The board's decision to distribute an additional CAD 1.05 billion (€1.05 billion) in dividends for Q4 2025, bringing the total approved payout to €1.5 billion, underscores the asset's robustness Agenzia Nova report. Shareholders now have the flexibility to receive this payout in cash or shares, a move that balances liquidity needs with long-term capital appreciation.

This dividend stream is particularly attractive in a high-interest-rate environment, where traditional yield assets struggle. With the 407 ETR's toll rates indexed to inflation and its traffic volumes showing resilience, the asset's ability to generate recurring, inflation-adjusted returns is a rarity in today's market.

Strategic Initiatives: Building for the Future

Ferrovial's success is not accidental but the result of disciplined capital allocation and innovation. The company has reinvested in technology-driven solutions, such as AI-powered traffic management systems and predictive maintenance tools, to reduce operational costs and enhance user experience. These initiatives not only improve margins but also future-proof the infrastructure against disruptions.

Moreover, the division's focus on expanding its North American footprint aligns with global megatrends. Governments are increasingly privatizing infrastructure projects to bridge funding gaps, and Ferrovial's proven track record in toll road management positions it to win new contracts. For example, its recent bids for U.S. highway concessions in Texas and Virginia could unlock additional revenue streams by 2026.

Why This Is a High-Conviction Buy

Ferrovial's Highways Division exemplifies the ideal infrastructure investment: predictable cash flows, strong margins, and a clear path to value creation. The 14.4% revenue growth and €1.5 billion in dividends from 407 ETR demonstrate the division's ability to deliver both capital appreciation and income. As global infrastructure spending accelerates-projected to reach $150 trillion by 2040-Ferrovial's assets are uniquely positioned to capture this growth.

For long-term investors, the division's combination of inflation protection, operational excellence, and strategic reinvestment makes it a rare "must-own" in the infrastructure sector. In a world where volatility is the norm, Ferrovial's highways business offers a rare anchor of stability and growth.