Many investors seeking high dividend yield have migrated to the energy sector to find steady payouts in utilities, master limited partnerships (MLPs) and other industries in this sector. Both MLP and utilities had a great return in 2011. For investors late to the game, Tortoise Capital Advisors manage a bundle of closed-end funds related to the energy industry. Tortoise Capital just released year-ended October 31, 2011 reports for their CEFs. The table below displays the CEF details of the funds issuing annual reports. The results were above average for most of the Tortoise CEFs as discussed in the following paragraphs.
Tortoise Power and Energy Infrastructure (TPZ) is a closed-end fund that seeks to invest in a portfolio of companies focused solely on the power and energy infrastructure sectors. Power infrastructure operations use asset systems to provide electric power generation (including renewable energy), transmission and distribution. Energy infrastructure operations use a network of pipeline assets to transport, store, gather and/or process crude oil, refined petroleum products (including biodiesel and ethanol), natural gas or natural gas liquids.
TPZ is trading at 25.66 with a distribution rate of 5.84% paid on a monthly basis. Since its launch in July 2009, TPZ has performed above expectations with a NAV return of 21% in 2010 and 14% in 2011. Its IPO price was $20.00 and it trades at $25.66% today with an NAV price of $26.07. In the year ended 10/31/2011, TPZ had net gains of $2.40 and paid distributions of $1.50 with $0.14 from return of capital. The adjusted expense ratio is a little high at 1.27% but is worth it with the excellent operating results so far.
|TPZ Holdings (as of 12/31/2011)||% of Total |
|Kinder Morgan Management, LLC (equity)||8.0%|
|Enbridge Energy Management, L.L.C. (equity)||7.8%|
|ONEOK Partners, L.P. (equity)||3.6%|
|Midcontinent Express Pipeline, LLC (fixed income)||3.1%|
|Enterprise Products Partners L.P. (equity)||2.9%|
|CMS Energy Corp. (fixed income)||2.8%|
|SourceGas LLC (fixed income)||2.8%|
|NRG Energy, Inc. (fixed income)||2.8%|
|TransCanada Pipelines Limited (fixed income)||2.8%|
|PPL Capital Funding, Inc. (fixed income)||2.7%|
|Top 10 Holdings as a % of Investment Securities||39.3%|
Tortoise Energy Infrastructure Corp (TYG) is designed to provide an efficient vehicle to invest in a portfolio of publicly-traded master limited partnerships and their affiliates in the energy infrastructure sector. These companies gather, transport, process, store, distribute or market natural gas, natural gas liquids, coal, crude oil, refined petroleum products or other natural resources, or explore, develop, manage or produce such commodities.
TYG is trading at $39.34 with a distribution rate of 5.58%. TYG had a price return of 32% in 2010 and 12% in 2011. TYG does trade at a 10% premium to NAV and has a high expense ratio of 1.74%. TPZ had net gains of $2.58 and paid distributions of $2.20. TYG distributed $2.20 as return of capital as distributions from MLP CEFs may be classified as return of capital. The issue arises because the MLPs in the portfolio distribute more cash than the accounting income that they generate, which is largely because of depreciation conventions. These MLPs distribute income, classified for tax reasons as return of capital, to their investors, including this fund. This fund, in turn, passes this return of capital income on to its own investors.
Tortoise Pipeline & Energy (TTP) intends to focus primarily in pipeline companies that engage in the business of transporting natural gas, natural gas liquids, crude oil and refined products and to a lesser extent, on other energy infrastructure companies. TTP is a new CEF that launched in 2011. Its first dividend of $0.40625 will be paid on March 1, 2012 to stockholders of record on February 22, 2012. TTP has a distribution rate of 6.58%.
Tortoise Energy Capital Corp (TYY), Tortoise MLP (NTG) and Tortoise North American Energy (TYN) results are shown in the table below. Tortoise MLP is the only listed CEF with a negative variance ($0.37) that paid more distributions to shareholders than it had in net total gains. This metric must be watched carefully as it can't be a continuous event or the distribution rate will be lowered.
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