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UTF: A Powerful Income CEF Yields 7.8%, Pays Monthly


  • Cohen & Steers Infrastructure Fund continues to be a high-yield defensive pick at an attractive price.
  • UTF is a CEF with a yield of 7.8%.
  • The CEF invests in the infrastructure and utility sectors which are very defensive in nature.
  • Net Asset Value is improving from its low in March.
  • Looking for a portfolio of ideas like this one? Members of High Dividend Opportunities get exclusive access to our model portfolio. Get started today »

Co-produced with PendragonY

Investing in high-yield defensive picks is a very effective income strategy, particularly in times of great uncertainty. Infrastructure, particularly utilities, is a defensive sector thanks to the necessity of their product and significant regulation that creates a large moat.

Utility companies also tend to have high, and rather stable, cash flow. As a result, individual utility companies often have fairly low yields since they are very popular with dividend investors. At High Dividend Opportunities, we generally seek to have dividend yields in excess of 6%. That puts many quality utility companies out of our target range.

Fortunately, there's a way we can get exposure to high-quality utility companies and get high yields as well. Yes, it's possible to have our cake and eat it too!

One of our preferred methods to get high yield out of sectors that generally do not pay high yields is a closed-end fund. CEFs frequently use leverage to boost returns, will pay distributions that are paid for through both dividends received and capital gains, and often focus on a particular sector. By investing in a CEF, we can get instant diversification in a sector, and the CEF converts capital gains into a nice stable distribution.

In the utility sector, one of our favorite CEFs is the Cohen & Steers Infrastructure Fund (NYSE:UTF). UTF provides us with exposure to high-quality infrastructure, while paying us an 7.8% yield. UTF has been a steady conservative position in our high-yield portfolio, and every income investor should own it too.

UTF Historical Performance

CEFs are actively traded, meaning that the manager is buying and selling constantly to best position the portfolio based on their outlook. This makes the fund manager the key component. We want a manager who has made good decisions over the long haul. While short-term out-performance or

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This article was written by

Rida Morwa profile picture

I am a former Investment and Commercial Banker with over 35 years of experience in the field. I have been advising both individuals and institutional clients on high-yield investment strategies since 1991. I am the lead analyst at High Dividend Opportunities, the #1 service on Seeking Alpha for 6 years running.

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In addition to being a former Certified Public Accountant ("CPA") from the State of Arizona (License # 8693-E), I hold a BS Degree from Indiana University, Bloomington, and a Masters degree from Thunderbird School of Global Management (Arizona). I currently serve as a CEO of Aiko Capital Ltd, an investment research company incorporated in the UK. My Research and Articles have been featured on Forbes, Yahoo Finance, TheStreet, Investing.com, ETFdailynews, NASDAQ.Com, FXEmpire, and of course, on Seeking Alpha. Follow me on this page to get alerts whenever I publish new articles.

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Analyst’s Disclosure: I am/we are long UTF, UTG. 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 (249)

Sorry in advance but total CEF newbie. Currently 30 years old. Would this be a good fund to hold in a Roth IRA? Any tax consequences for holding in an IRA? If my IRA is at Vanguard, can I DRIP? Again sorry for the newbie questions
PendragonY profile picture
There are no tax drawbacks for holding it in IRA or other tax-advantaged accounts.
UMichAlum profile picture
Any UBTI issues with this fund?
PendragonY profile picture
No, for the most part, UBTI is something tied to partnerships (or at least entities that are taxed as if they were partnerships).
rjm22 profile picture
Feedback CEFconnect
6:31 PM (1 hour ago)
to me, Feedback

Thanks for reaching out. This is a known issue with Chrome and we are attempting to find a solve but we do encourage users to use a different browser until we can resolve this.
PendragonY profile picture

That doesn't really tell me much, and as I said I use Chrome and have had no problems (and others have reported the same lack of issues).
@PendragonY _ Try using Chrome II.
Flipper2058 profile picture
You mean the guys that were forced to dump in March due to leverage on thin stocks?
PendragonY profile picture

I am not sure what you are talking about. Can you add more details and specifics?
PendragonY profile picture
So big infrastructure bills are in the offing. The Democrats have a $500 billion proposal and Trump is looking at $1 trillion.

SleepyInSeattle profile picture
Good article, well done. I own both UTF and UTG.
PendragonY profile picture
Glad you liked it. Both are good solid income funds.
15 Jun. 2020
Why aren't new comments marked or highlighted so you can tell which comments are new. Frustrating.
PendragonY profile picture

Not sure why you aren't seeing new comments tagged. But I am (like yours for instance).
allday1234 profile picture
Sure looks like they are marked to me, but maybe I am seeing things
@Tom1 make sure you have sort button set to "newest" and you should be ok. I used to be long UTF but I bought at a better discount than now and sold in January. It was a nice ride.
Don't really see the need to own both UTF and UTG, but UTF is the better choice now given its discount versus the latter's premium.
PendragonY profile picture

There is certainly a lot of over-lap in their holdings, so it is not unreasonable to pick just one of them. And UTF is the better value right now. However, there are different enough that it is fine to hold them both as well.
ijeff profile picture
It has had a nice run since March as the discount has narrowed considerably. I'd still rather wait for a better entry point.

I have no clue where this stock market is going. I have a stronger opinion on where the economy is going. I believe we will have some significant obstacles ahead as the impact of the partial re-openings will be felt. Many of these jobs will not return this year. Summer is virtually cancelled where I live and normally summer is a huge economic event and this is in a State that is mostly open.

I think people are confusing economies 'opening' with economies 'thriving and back to normal'. At some point this economic reality will set in. Obviously I am extremely pessimistic and hope I am wrong, but everything I see points in that direction. The next wave of federal stimulus will be needed and I don't think they have a clue as to exactly what type of stimulus is required. This was never going to be a 'turn the switch back on' recovery but the stock market has been acting like it was.
PendragonY profile picture
I don't know where share prices are going. Even in normal times, that is hard to predict. Instead, I focus on paying a price that is a good value. I think the current price for UTF is a good value. It could certainly get to be a better value, but why wait instead of taking the sure thing?
ijeff profile picture
I don't disagree with the bulk of this article. I have been following both UTG and UTF recently. I know its not a sure thing, but I really see a substantial market retreat at some point this year though not necessarily to March 20th levels. I might miss some opportunities but I think the odds are on my side being patient.
Joe Lunchbox profile picture
I think it's a good value. Over 8% distribution paid monthly - that's hard to beat. I'll hold it for a long time and drip drip drip until I retire. Then it will be a nice addition to my pension.
Thanks for the article. As a newbie to CEFs I was curious if a majority of CEF were held in tax deferred accounts, or in taxable accounts? I realize that this is highly dependent on individual situations, however would there be a priority pyramid for accounts that held CEFs? Thanks again and apologies for the newbie question.
PendragonY profile picture

There are no issues specific to a CEF that makes the account type critical.
Vandooman profile picture
Good article. I have a boatload right now because C&S folded another fund, INB, into UTF. A bit of doubling up because I own CCI, NEE and Duke on their own. NEE has been a home run. Glad you like C&S. Have held their CEF's for many years.
PendragonY profile picture

Yeah, I made quite a bit of money on the runup in price of NEE.
draconian5849 profile picture
Perhaps I'm missing something, or maybe I'm just an idiot. Perhaps someone can explain why UTF is such a good investment.

Using the "Backtest Portfolio Asset Allocation" tool from Portfolio Visualizer, it shows that UTF has a total return of -10% so far this year, from January 1 through May 31. That's compared to -5% for the S&P 500.

UTF has a max drawdown of 28% compared to 20% for the S&P 500.
@draconian5849 Try testing longer time periods. Also, UTF is not meant to mirror the S&P 500. The fund is concentrated in infrastructure and utility companies, and it's leveraged, which increases volatility.
PendragonY profile picture

YTD is a pretty short period. Also the price is why we think UTF is a good investment going forward (that whole buy low thing). Finally, UTF is an income investment, so it is producing a steady and reliable income. That the share price is now low provides a buying opportunity and a way to increase one's income at a good price.
Joe Lunchbox profile picture
I'd buy UTF but I already have tons of it. It's done well through thick or then. I will look into this UTG, as I've never heard of it.

PS: my page doesn't show a "follow" next to your name.. I'll see if there's another way to do it.
Jim_Purzickis profile picture
I would not call UTF a 'defensive pick' as it is leveraged, however, it is a great fund. You will lose plenty in a bear market but the fund recovers and grows on price. The distribution is rock solid. I have made a lot of money in UTF in recent years from timing trades and buy and hold.

Joe Lunchbox profile picture
>you will lose plenty in a bear market<
The "drippers" come out ahead during a bear market because the distribution buys more shares since it's a lower price (if they hold until the price recovers).
PendragonY profile picture
@Joe Lunchbox

Yes, that is one of the big advantages of DCA. When share prices are low the same dollars buys more shares. With dividend paying stocks that means dividends increase even faster.
Solid companies but it all denpends on if the Fed can keep the overall market from tanking. good buy on dips though.
PendragonY profile picture
I don't think it all depends on the Fed.
Longbottom profile picture
Still dripping my position...am still looking to add utg in the future.
I've been thinking more and more on infrastructure (and materials) sectors being potentially good plays in a world where governments (and central banks) are very willing to throw around money anywhere they think it could drive growth. Besides UTF/UTG, what other contenders in this space are folks considering? Thank you.
Joe Lunchbox profile picture
I have some BUI, too. It's a steady investment with a monthly distribution of around 7%.
Thanks, will look into BUI next chance I get
Dennis O profile picture
Love UTF/UTG also own BIPC/ET/BUI/HASI/MGU/HTD. I am a big sector guy.
Hi Rida Is the expense ratio on UTF 2.5%? Thus the yield 5.3%?
The stated yield is after fees!
PendragonY profile picture
The stated yield is net of fees.
between utf &utg which has more downside risk
jack kreg profile picture
Rida and others on SA are great contributors to our objective of profitable investing, whether we are more or less agressive, whether we invest for current/future income or short or long term capital gains. we all benefit from these articles.
I have to say that if you have investable capital, you blew it. That capital should have been invested in March/April, not after the 45% run up after March lows. Let's hope for the sake of our economy and people, we dont retest those lows later in the year. The country has moved mountains to avoid virus death, economic and job loss. We have to press forward and continue our climb out of this global battle.
Best to USA and our global allies!
PendragonY profile picture
@jack kreg

Thanks for reading and commenting.

While many of the crazy good deals are now gone, there remains plenty of good deals to choose from.
@jack kreg I'd be more confident in US economic recovery, if shutdown fatigue were not accompanied by social distancing rebellion.
Joe Lunchbox profile picture
I made some pretty good investments during the bottom of the "V" because I knew they HAD to come back. I sold them when I had a good profit and reinvested in some of my core holdings. I've made some bad choices, but it's nice to make some good ones occasionally!
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