UTF: 7% Yield On Infrastructure, 3% Discount (NYSE:UTF)

FerreiraSilva

Looking for high yield exposure to infrastructure and utilities?

When previously covered the Cohen & Steers Infrastructure Fund (NYSE:UTF) in a mid-July article, it was selling at a premium to NAV. Since then, UTF has pulled back a bit and was selling at a -3.4% discount to NAV/share, as of 9/22/22, which is a deeper discount than its 1-3- and 5-year averages.

UTF invests in infrastructure assets, such as Midstream Energy, 11%, Cell Towers, 9%, Gas Distribution, 7%, Freight Rails, 5%, Toll Roads, 8%, and Airports, 5%, and also has exposure to Utilities, 32%:

Profile:

The Fund’s objective is to achieve total return, with an emphasis on income. Under normal market conditions, the Fund will invest at least 80% of its managed assets in securities issued by infrastructure companies, which consist of utilities, pipelines, toll roads, airports, railroads, ports, telecommunications companies and other infrastructure companies. The fund benchmarks the performance of its portfolio against a composite index of 80% FTSE Global Core Infrastructure 50/50 Net Tax Index (FTSE 50/50) and 20% BofA Merrill Lynch Fixed-Rate Preferred Securities Index.

It was formerly known as Cohen & Steers Select Utility Fund, Inc. Cohen & Steers Infrastructure Fund, Inc. was formed on January 8, 2004 and is domiciled in the United States. (UTF site)

Management uses leverage to increase the yield and earnings. It was 28.13% as of 6/30/22. Total Assets are $3.5B, with annual expenses at 2.19% of assets. UTF has 246 holdings, and trades an average of 119K shares/day:

UTF has 57% exposure to the US, and 14% to Canada, with 6% in Australia, and 3% each in the UK:

UTF’s top 10 positions form ~34% of its portfolio, with a mix of well-known Utilities and Infrastructure names, such as NextEra Energy (NEE), Duke Energy (DUK), and American Tower (AMT), among others.

Distributions:

UTF pays monthly distributions and generally goes ex-dividend near the middle of each month, with a pay date near the end of the month. At its 9/22/22 closing price of $24.39, UTF yielded 7.63%. Management raised the monthly distribution from $.1340 to $.1550 in January 2018, where it has remained.

Taxes:

As of 8/31/22, UTF’s 2022 distributions are estimated to have been comprised of ~27% NII, and ~73% capital gains, with no return of capital.

NAV Pricing:

Since NAV/Share is calculated at the end of each trading day, you have to look at the most recent closing values to determine the current NAV discount or premium. Buying CEFs like UTG at a deeper discount than their historical average discounts/premiums can be a useful strategy due to mean reversion.

UTF was selling at a -3.42% discount to NAV, as of the 9/21/22 close. That compares favorably to its 1- and 3-year premiums of 0.85% and 0.73%, and its 5-year NAV discount of -2.08%:

Performance:

UTF has outperformed the S&P so far in 2022, and over the past year and quarter. It has lagged the broad Utilities sector over all of these periods on a price and total return basis. Utilities have been the second top performing sector over the past year and so far in 2022, far behind the energy sector.

UTF outperformed the Morningstar US CEF Sector Equity category on an NAV basis in 2017-2019 and in 2021, and outperformed it on a Price basis in 2017- 2020, and 2014-2015: