Reaves Asset Management Blog

Need for Investment Income Puts Infrastructure in Spotlight

Written by The Investment Team at Reaves Asset Management | Jun 11, 2020 8:11:09 PM

Razor-thin yields and a souring outlook for most stocks’ dividend growth have thrust infrastructure into the spotlight as a source of reliable investment income. Income-starved investors will find a buffet of options to choose from.

Infrastructure strategies run the gamut from private co-investments in new bridges, toll roads or airports, to funds that invest in publicly traded companies providing the basic services allowing society to function.

At Reaves, we define our own approach to infrastructure as essential service investing. We narrow our focus to companies operating in industries at the very foundation of a modern economy. Examples include electric, gas and water utilities, broadband communications networks, and wireless telecommunications networks. We believe the necessity of such services allows these companies to steadily grow earnings and dividends, even when the economic outlook sours.

The companies we invest in are also publicly traded. This opens infrastructure investing to a wider client base than the large pension funds and endowments that participate in private investment partnerships. We believe our unique approach has other benefits over private infrastructure, particularly in the current volatile market environment.

In a recent Q&A explaining Reaves’ approach, our CEO, Jay Rhame, touched on some of the benefits of public infrastructure. As Jay explains:

“The primary advantages of the public infrastructure investing route are liquidity, portfolio transparency, and the ability to take advantage of short-term dislocations in the stock market … Public infrastructure investing can also deliver a growing stream of dividend income, inflation protection and economic resilience due to the non-discretionary nature of the services offered by the companies in the portfolio.”