Global governments are investing more in infrastructure after a long period of underinvestment, observes Bob Carlson, investment strategist and editor of Retirement Watch.
Infrastructure companies also tend to be good hedges against both inflation and slower economic growth. The companies generally provide essential services for which there isn’t much fluctuation in demand, and their prices tend to be indexed for inflation or costs.
Infrastructure stocks also are doing well, and we own them through Cohen & Steers Global Infrastructure (CSUAX). The fund doesn’t try to track an index, and it invests globally. The managers look for attractively valued companies that are likely to benefit from the current economic environment.
The fund can invest in any type of infrastructure company. Recently, about 34% of the fund was in electric utilities. Other top sectors were cell tower providers, freight railways, energy services companies and gas distributors.
The fund recently had 60 positions with 38% of the fund in the 10 largest positions. Top holdings were NextEra Energy (NEE), Norfolk Southern (NSC), American Tower (AMT), Canadian National Railway (CNI) and Enbridge (ENB).
Let’s also add a high-yielding infrastructure position with the closed-end fund Cohen & Steers Infrastructure (UTF). The fund can own any type of infrastructure company based anywhere in the world. It owns many of the same positions as the open-end fund, CSUAX, discussed above.
UTF is selling at a 0.17% discount to net asset value. This is a bargain compared to the six-month average premium of 1.41% and three-year average premium of 0.31%. The distribution yield recently was 6.40%, and the leverage ratio was about 26%.