This year the Cohen & Steers Infrastructure Fund has performed well, thanks to strong infrastructure asset performance and expectations of lower interest rates.
This fund tracks some of the largest infrastructure companies and utilities. It has seen a rise in value this year of 18%.
UTF has a strong dividend yield over 7,7%. This is more than the other popular funds, such as the Schwab US Dividend Equity Fund (SCHD), and Vanguard High Dividend Funds (VYM).
Investments in Infrastructure
Cohen & Steers Infrastructure closed-end funds is performing well, as the demand for infrastructure continues to rise. Analysts predict that the demand for large-scale infrastructure projects is expected to continue increasing.
The United States, for example, passed the Bipartisan infrastructure deal, which allotted $1 trillion of spending.
India, China and Europe also invest substantial amounts of money into this industry.
As countries upgrade and transition to new energy sources, they also invest in upgrading their infrastructure.
The industry is now very popular with private equity investors and those who invest in the stock market.
The Cohen & Steers Infrastructure Fund is booming because of this demand. It is one of the top funds with assets exceeding $3.3 billion and 252 businesses in its portfolio. This fund achieves a higher leverage, of around 28%.
The UTF Fund is dominated by companies in the energy generation and distribution industry. The companies in this sector make up about 35%.
Midstream energy partners is where the other major names are. They are energy companies which gather, transport and process commodities such as crude oil and gas. These companies are unique in the fact that they do not pay corporate tax. These taxes are instead passed on to the consumer.
The portfolio also includes companies involved in telephone towers and airports.
The portfolio of nine companies is worth more than $100 million. Nine of its portfolio companies are worth over $100 million.
American Tower is the largest REIT in America. This company provides tower solutions for companies such as AT&T T-Mobile and Vodafone.
NextEra Energy is the largest utility in the United States, serving millions of Florida residents. Duke Energy and Southern. National Grid, a British utility company in New York and the UK, provides services to both countries.
Power Grid, Energy Transfer Cheniere Energy and Norfork Southern are also included in the UTF Fund.
Why I don’t buy this infrastructure fund (UTF), which yields 8 percent
Cuts in interest rates as catalyst
Interest rates have been falling in the United States, and elsewhere. This is a key driver for the Cohen & Steers Fund.
Analysts expect the Fed to continue cutting rates in future meetings, after the US released a disappointing jobs report. In October, the economy only created 12,000 new jobs. This was much less than expected at 100k.
The Fed is therefore likely to cut interest rates by 0.25 percent at its next meeting, which will be held on the Wednesday of next week. The Fed will likely hint at further cuts during the next meetings.
Interest rates are expected to be cut by other central banks, including the ECB and Bank of England.
The infrastructure sector benefits from falling interest rates because they invest a lot of money.
Data centers are another catalyst that has led to a significant increase in energy consumption.
However, there is a risk that these companies are overvalued and could reverse course. American Tower, for example, has a ratio of price to earnings of 38 while NextEra Energy is at a multiple 22.
Read more about Infrastructure boom: Should you buy the Cohen & Steers ETF (UTF?
UTF Analysis
UTF Chart by TradingView
On the weekly chart, it is clear that UTF Fund peaked a couple of weeks ago at $26.25 and now has dropped to $25. The price is still slightly above the $24.16 key support, which was its high in April 2022. This price also corresponded to the top of the patterns cup-and-handle or double-top.
Both lines of MACD have crossed in a downward direction. This is also true for the Relative Strength Index, which moved up to 60.
The stock is therefore likely to drop, and then retest its key support of $24.15. It is a popular pattern that is called a “break and retest”.
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