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BUI: Strong Short-Term Return, Lowering Outlook From Here


  • BUI has seen a very strong short-term gain, which make me cautious going forward.
  • The fund sat at a discount when I recommended it, but now it trades at a premium price.
  • The Utilities sector continues to face challenges, with the economy re-opening on only a partial basis.

Main Thesis

The purpose of this article is to evaluate the BlackRock Utilities, Infrastructure, & Power Opportunities Trust (NYSE:BUI) as an investment option at its current market price. This was a fund I strongly recommended during the sell-off, and its return has been impressive. Looking ahead, I see merit for continuing to hold it, as utility companies have seen decent financial performance, and investors may continue to crave the relative stability of the sector. However, I see a stronger argument for caution. The fund's discounted price, which I touted in April, has turned to a premium, which I view cautiously given how frothy markets are looking. Further, while partial re-openings are a positive for the sector, if we see a wave of new cases and renewed calls for lock-downs, power usage will certainly take another big hit. Finally, recent tax provisions in the Cares Act did improve liquidity across the Energy and Utilities sectors. However, some of these programs only accelerated refunds the companies were already entitled to. Therefore, while it improved their short term financial positioning, it did not alter the market value of the company.


First, a little background on BUI. The fund is managed by BlackRock (BLK), and its objective is to "provide total return through a combination of current income, current gains and long-term capital appreciation". BUI seeks to achieve this objective by investing in equity securities issued by companies in the Utilities, Infrastructure, and Power business segments and by utilizing an option writing strategy. BUI currently trades at $21.23/share and yields 6.84% annually by paying monthly distributions. I recommended BUI about two months ago, when I felt the fund's discounted price offered a great way to buy in to the Utilities sector, which I felt was due for a rebound. In hindsight, this call was very timely, as BUI has seen a return in excess of

This article was written by

Dividend Seeker profile picture

I began my career in financial services in 2008, at the height of the market crash. This experience has shaped my investment strategy - which is focused on diversification, dividends, and growth opportunities. I am a competitive tennis player, and I competed at the Division I level in undergrad. I have a Bachelors and MBA in Finance.

(He is a contributing author for the investing group CEF/ETF Income Laboratory where he specializes in macro analysis. Features of CEF/ETF Income Laboratory include: managed income portfolios (targeting safe and reliable ~8% yields) making use of high-yield opportunities in the CEF and ETF fund space. These are geared toward both active and passive investors of all experience levels. The vast majority of holdings are also monthly-payers, for faster compounding and steady income streams. Other features include 24/7 chat, and trade alerts. Learn more.)

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (23)

Dividend Seeker profile picture
BUI back in the 1% premium range, picked up some today
@Dividend Seeker , thanks for the alert.
@Dividend Seeker how do you figure that , has been in the green all day ,last night was premium of 1.69% ? I'm holding out for a slight discount , needs to fall to current NAV of $ 23.60 at least IMO. Yield currently only a hair above 6% , not quite good enough
Dividend Seeker profile picture
I said 1% range because of the 1.69% premium and the fact the fund was flattish at one point this morning. But, in fairness, I should have said 1-2% premium range. Was waiting to buy more so I added a few hundred shares, certainly if it goes in to discount territory I would buy more.
You cannot refuse to pay your utility bill forever. Eventually you will get disconnected. Heck, if your worried about utilities, worry about Apple and other techs. People need utilities and food, they don't need a $1000 phone or the latest gaming console. Relax, utilities in the long run will be fine. Buy...buy...buy.
Dividend Seeker profile picture
Thank you for sharing your perspective
have to agree. as far as stocks go utes are safest.
Dividend Seeker profile picture
That is true, and although while I like BUI as a way to play the sector, there are much safer alternatives out there.
DS, nice article as always. Regarding your caution above: "Residential utility bills going unpaid and the impact of Covid-19 on household finances...". I really don't know what, or who to believe anymore. I hear the unemployment rate is some 13.8%. But recently I talked to a Realtor I know and she says it is "busy as ever". Also, wanted to install a new concrete driveway at my house, and the installer informed me (yesterday) the waiting list is until the end of September (!). He says he has never been busier. I am located in Virginia.
Dividend Seeker profile picture
It's a great point, this market seems so distorted and very regional. It's possible people are simply forbearing utility bills when they could otherwise pay them. I don't see this as bring unrealistic. The government handed out literally thousands of dollars to mid and lower income families, so I would have to question why they can't pay their electric bill. That said, this crisis could be hurting people in ways I can't see, so I am trying not to pass judgement
of you bought in April you
you got a large yield on cost. if you sell for the profit, where will you deploy the money? I sold it recently on a price breakeven keeping the divs and bought fof which had a higher dividend and is up nicely since then.
Dividend Seeker profile picture
I would, although I will admit I am de-risking my portfolio. I don't trust the market at these levels
atom profile picture
I've held BUI in my taxable account since 2016, and it has performed OK. Some ROC, some capital gains, and most of the income has been qualified, if I remember right.

However, if I had noticed the 15% premium last year I would have sold it. Actually, my notes say that I was aware of that premium, but did not pull the trigger. Should have. Should the premium creep up above the current 2-3% to 5% or more -- where it was recently -- I would most likely sell. The money could be put to work in something with a discount.
Dividend Seeker profile picture
Good point, yes the premium is something I keep a keen eye on. Current level isn't too bad, but I'm happy with the profit
Have been buying BUI over the past few months. Am still buying, and anticipate "filling out" my position (in an IRA) over the next couple months.

Retired income investor
Dividend Seeker profile picture
I imagine it has made you a nice profit then, well done!
You don't own BUI for capital gains. This is just an income stock. The dividend has been flat for years but has been an above average payer. Pays every month.
When it drops, like it recently did, add 10% (if you can) for the reliable return. If it goes up. Fine. But no need to sell it if you don't need the capital.
For a saver for retirement this is a good one to have in a IRA as you can reinvest the dividend and just add more shares every month.
I did that for years and now just take the dividend cash from time to time if I need it. I have no expectations to sell any shares.
Dividend Seeker profile picture
Thanks for sharing that perspective, everyone's individual circumstances are certainly different. I am glad BUI has performed well for you, I hope that continues!
scarp1952 profile picture
A good article, thanks. I've held this in past and sold a few years back as it did like many CEF funds and ran up really high when compared to its brethren for no discernible reason. I sold and moved to another similar CEF improving yield and performance. Your comment about waiving payment caught my eye especially as I do view this as a short term negative. I noticed just last week that Dominion had filed requesting this rule be extended. Knowing that companies always act in there best interests do you have any idea what may have motivated this. Thanks.
Dividend Seeker profile picture
I appreciate the feedback, thanks for sharing your experience. I would say Dominion may have done that for two reasons. One, good PR. Two, as long as customers are delaying/deferring payments, the sector should continue to quality for Congressional support.
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