Tag Archives: Closed-end Funds

Dividend Stocks

Dividend Investments: Brookfield Global Listed Infrastructure Income Fund Offers Elevated Return Potential

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Dividend Investments: Brookfield Global Listed Infrastructure Income Fund Offers Elevated Return Potential

Stock markets continue to trade near all-time highs, as both the S&P 500 and NASDAQ have posted recent records in their underlying valuations.  For investors, this can complicate the task of identifying inexpensive asset opportunities. But one sector that should be considered by value-oriented investors is in closed-end funds, which often trade at attractive discounts relative to net asset value.  Additionally, closed-end funds tend to offer excellent income opportunities for investors seeking reliable dividend payouts.

Dividend stock strategies work well in low-interest rate environments, so when investors are able to combine closed-end fund opportunities with strong income payers it becomes possible to identify the most ideal profitability scenarios in the financial markets.  The Brookfield Global Listed Infrastructure Income Fund Inc. (NYSE:INF) offers one such opportunity, with its annualized dividend payout of $0.98 per share (which is paid monthly).  This equates to a 7.95% distribution yield, which is far above the 1.76% dividend yield that is currently generated by the S&P 500.  

Stock Chart

The Fund has rallied over the last six months.  The Fund’s current largest 10 holdings are an indicator of the overall positioning and asset allocation.

Stock Holdings

Looking more deeply into the Fund, we can see that as of June 30, 2018, 99% of its managed assets were in publicly-traded equity securities of infrastructure companies.  As of July 31, 2018, the Fund has $202.81 million in assets under management (AUM). Recent rallies in share prices have been built on prior earnings progress from these companies, with broader valuations moving steadily higher since the beginning of 2016. In addition, market concerns regarding interest rate increases and inflation have somewhat subsided.

Market Outlook: Trade Tariffs and Monetary Policy

Most of the market has experienced some level of volatility and turmoil as the impact of political upheavals and heightened tariff discussions has made its influence felt.  We are still seeing escalating trade tensions between US, China, and the Eurozone – and this has had a ripple effect on stock exchanges around the world. Moreover, these bearish moves can be attributed to the panic felt by investors relating to potential interest rate increases at the Federal Reserve.

This activity generated many of the declines experienced in stocks such as INF during the February-March period in 2018, and the lower valuation generated by the selling pressure seems to have created a strong buying opportunity for yield-seeking, value-oriented investors.

Deeper NAV Discounts and Higher Returns

On a YTD basis, INF is trading lower by -4%, and this creates added discounts for investors relative to net asset value (NAV).

Closed-end Funds

Given the current trends in the market, INF is trading at a discount to NAV of 14.43%, and this suggests further upside potential in share prices.

Stable Distribution

The Fund is likely to continue attracting the attention of income investors due to its stable distribution payouts.  INF offers broad exposure to a global universe of equity securities of publicly-traded infrastructure companies. The Fund yields 7.95% at current price levels ($0.98 per share on an annualized basis). This creates interesting opportunities for value investors given the current low-interest rate environment and the Fund’s recent share prices.  

The potential for stable income and a diversification in a real asset class, such as infrastructure, helps INF stand out amongst its peers.  As a monthly distribution payer, the stock continues on its positive trend and broader sentiment seems to be falling in line with expectations. All combined, the outlook looks stable and investors could consider INF as a closed-end fund which may capitalize on its four core advantages: portfolio diversification, potential for capital appreciation, and its stable yields for income-seeking, value-oriented investors.

Emerging Markets, Stock Markets

Closed-end Funds: Global Exposure In The Asia Pacific Fund

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Closed-end Funds: Global Exposure In The Asia Pacific Fund

The Asia Pacific Fund, Inc (NYSE: APB) is registered as a closed-end management investment company, with an objective to achieve long-term capital appreciation through investment in Asia Pacific Countries (excluding Japan).  This creates the opportunity for investors to gain access to emerging markets throughout the region while still maintaining broad regional diversification.

Source: CEF Connect

Most analysts agree that a significant portion of global growth will be present in emerging Asia over the next decade.  These assets can be accessed at cheaper levels given the Asia Pacific Fund’s attractive discount to net asset value (NAV).  The fund has rallied strongly since February 2016, and investments here come with an attractive dividend yield of 2.14%.

Economic Trends in Asia

The year 2017 was positive for Asian markets.  Stocks throughout the region recovered against the backdrop of upward revisions in earnings and stabilizing political factors externally.  The MSCI Asia All-Country Index (which excludes Japan) closed with a 42.1% gain for the year, and its dividend yield index rose by 29.8%. The rising tide lifted many regional funds, and this positivity in global markets helped the Asia-Pacific Fund gain approximately 50% in 2017.

The MSCI Asia All-Country Index (which excludes Japan) closed with a 42.1% gain for the year, and its dividend yield index rose by 29.8%.  The rising tide lifted many regional funds, and this positivity in global markets helped the Asia-Pacific Fund gain approximately 50% in 2017.  These are strong gains which are more closely in line with the longer-term expectations for Asia (relative to Western economies) through the year 2022.

Source: IMF

However, shorter-term volatility has remained in place, and the first quarter of 2018 was not as expected.  In the wake of faster-then-expected interest rate hikes by the US Fed Reserve, investors enacted strategies tied to risk aversion.  

The world also saw itself on a brink of a trade war between the U.S. and China, which hastened with widespread tariff implementations.  The Asia-Pacific Fund fell 0.9% during the period extending from January 2 to April 2, 2018. The greatest drop in the share prices was between January 31 and February 12, wherein the stocks plunged by 10% before entering correction territory in the next few days.

Fund Holdings

The reality is that as interest rates have increased in Asia, liquidity has tightened.  Even though the NAV and the market price of the Asia-Pacific Fund both increased by more than 20%, the year its share of challenges.  

Problematic sectors were seen in the internet and software industry.  To mitigate the negative influence of global trends, the Asia-Pacific Fund has balanced its portfolio to increase exposure to top performing sectors (like industrials, information technology hardware, and real estate).

Source: Fidelity

The major sector concentrations of the fund are devoted to Real Estate (17.7%), Industrials (16.2%) and Consumer Discretionary assets (15.9%), with 5% given to holdings in both Longfor Properties Company and China Construction Bank (Class “H” Shares).

Financial Performance

The overall performance of the fund was positive during its annual period ending on March 31, 2018.  The Asia-Pacific Fund shows that price-to-book multiples, price-to-earnings multiples and its yield remain favorable when compared to the benchmark MSCI AC Asia Index (ex-Japan).  Positive developments in this regard prompted the Board to advise shareholders to vote against the proposed liquidation of the fund.

This looks to have been a wise choice given the subsequent performance seen in share prices.  Currently, the Asia-Pacific Fund has total net assets of $148.8 million and has 10.3 million outstanding shares as of July 31, 2018.  The net asset value stands at $14.38 and a commitment to its Dividend Reinvestment Program is what makes APB a favorable option for prudent investors.

Source: Morningstar

The fund’s NAV per share has increased from $12.96 on March 31, 2017, which means we have seen gains of nearly 11%.  On December 21, 2017, the fund paid out a dividend of $0.61 per share (with a yield of 2.11%). The PE Ratio stands at 4.53 and the EPS is $3.2.  For the Asia-Pacific Fund, the momentum in earnings revisions has acted as a key driver of growth.  Investors can look forward to a potential growth in the stock prices as the fund has posted a consistent performance over the past two years.  

After facing a drop in February 2016, the stock raised back by 75% in the period ending November 2017.  The increase in the stock was due primarily to the positive performances seen in the real estate and hardware sectors.  This suggests that markets are well-prepared to buy the stock when it is trading at a significant discount. The positive performance and economic growth of the Asia Pacific region continues to have a positive impact on share prices – and this looks set to continue in the quarters ahead.