Monthly Dividends Power Up Reaves Utility

07/24/2020 5:00 am EST

Focus: UTILITIES

Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

There has been a healthy rotation back into the utility sector; my hunt to raise our exposure in the sector leads me today to recommend the Reaves Utility Income Fund (UTG), explains Bryan Perry, income expert and editor of Cash Machine.

Reaves Utility is a closed-end fund with a 15-year track record of outperforming the S&P 500. The fund has $1.8 billion in assets, sports a very attractive yield of 6.8% and pays a monthly dividend.

The management team manufactures this 6.8% dividend yield by deploying about 22% leverage while collecting normal quarterly dividends and generating long-term capital gains that combine to pay a monthly dividend of $0.18 per share.

The monthly dividend in 2010 was $0.1150, which demonstrates management’s ability to navigate growth and income exceptionally well.

Reaves Utility Income has 43 holdings in the portfolio that include electric utilities, telecom providers, water utilities, cell tower real estate investment trusts (REITs), data center REITs, railroads and natural gas pipelines.

Overall, it’s an excellent blend of blue-chip, toll-taking businesses with a proven track record of delivering solid income and growth. It's recent top 5 holdings are NextEra Energy (NEE), Union Pacific Corp. (UNP), BCE, Inc. (BCE), Verizon Communications (VZ) and WEC Energy (WEC).

This impressive fund will make a fine addition to our Safe Haven Portfolio,  hopefully for years to come. Let’s put this tried and true fund to work today. Buy Reaves Utility Income Fund under $32.

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