Investors in search of income have been hit hard by the COVID-19 crisis. Bond yields and interest rates have tumbled, and dividend cuts have proliferated. By contrast, the companies in Ecofin Global Utilities and Infrastructure Trust’s (EGL’s) portfolio have proved relatively resilient. In addition, when paying its dividend, EGL is able to use its distributable reserves to top up any shortfall in revenue that might occur.
The defensive attractions of the sector have been recognised and, as investors are drawn towards the trust, EGL is now issuing shares to meet demand and prevent its shares from trading at an excessive premium to net asset value (NAV).
EGL’s manager has been taking advantage of weak markets to build positions in selected opportunities at attractive valuations. This strategy is already bearing fruit. After a period where there have been few transactions, he expects to see more merger and acquisition activity as markets recover. This could prove beneficial to EGL’s portfolio.
EGL seeks to provide a high, secure dividend yield and to realise long‐ term growth, while taking care to preserve shareholders’ capital. It invests principally in the equity of utility and infrastructure companies which are listed on recognised stock exchanges in Europe, North America and other developed OECD countries. It targets a dividend yield of at least 4% per annum on its net assets, paid quarterly, and can use gearing and distributable reserves to achieve this.