If You Want to Earn a Passive Monthly Income, Read this
In today’s market, certain businesses make more cash than others. And many of those businesses come from the infrastructure sector.
Whether it’s a natural gas utility or an airport operator, infrastructure companies often enjoy monopoly-like status in their operating regions. And because these companies provide services that are essential to modern day society, the demand for their services have been mostly consistent. This allows them to generate a steady stream of revenues and profits.
As a result, many infrastructure companies have generous dividend policies. And today, I’m going to show you a convenient way to tap into these cash cow businesses: through Brookfield Global Listed Infrastructure Income Fund (NYSE:INF).
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INF is a closed-end fund created in 2011 to provide high total returns with an emphasis on income. As the name suggests, the fund invests in infrastructure companies to achieve its investment objective. And because INF trades on the New York Stock Exchange (NYSE), investors can buy and sell this closed-end fund just as they would with a regular stock.
I mentioned earlier that infrastructure companies can pay hefty dividends. So with a portfolio of such companies, INF fund can pass those dividends on to its investors. The fund currently pays monthly distributions of $0.0817 per share, giving INF stock an annual yield of 8.1%.
To put it in perspective, the average S&P 500 company pays a measly 1.9% at the moment. Therefore, an 8.1% annual yield can go a long way towards boosting the return of an income portfolio.
Of course, an investor can also buy shares of a publicly traded infrastructure company directly, and some companies can offer even higher yields up front. So why bother with a closed-end fund?
Well, the answer is diversification. Nowadays, ultra-high yielders are not known for their dividend safety. If an investor puts all their savings into one 10%-yielding company and that company encounters some problem and cuts back its dividend, it would severely impact the investor’s income stream.
And that’s why INF can be of great help. As of December 31, 2017, the fund has 47 portfolio companies coming from 10 industries within the infrastructure sector. Its top three holdings are pipeline company TransCanada Corp (NYSE:TRP), toll road company Vinci SA (EPA:DG), and communications infrastructure company American Tower Corp (NYSE:AMT). Note that no single company represents more than six percent of the fund’s portfolio. (Source: “Fact Sheet,” Brookfield Global Listed Infrastructure Income Fund, last accessed February 13, 2018.)
At the same time, the company provides investors with some international exposure. While the U.S. is still the core of the portfolio (representing 52.6% of the fund’s assets), INF’s portfolio companies are also found in Continental Europe (19.0%), Canada (11.2%), the U.K. (7.8%), Asia Pacific (5.8%), and Latin America (1.8.%). The fund holds the remaining 1.9% of its assets in cash.
By diversifying across industries and geography, the fund provides assurance that if one company gets into trouble, the impact on the entire portfolio’s income stream would be limited.
What’s more, while the fund offers a well-balanced income portfolio, it hasn’t really been a hot commodity. INF currently has a net asset value (NAV) of $13.85 per share, and yet the stock trades at just $12.18 apiece. In other words, the fund is currently offering a 12% discount to its NAV.
That’s why for investors seeking to earn monthly dividends, INF fund deserves a serious look.