Here’s a great utility fund that’s just been knocking it out of the park since 2004. It has just about everything going for it with low risk, long term growth, consistent dividend payouts, extra bonus in December and right now it’s at a discount.
As a result of the recently completed capital raise, retirement income investors can now buy shares of closed end fund Reaves Utility Income (NYSEMKT:UTG) at a 7% discount and lock in 6.2% yield paid monthly. But you need to act soon because I expect the market will recognize this exceptional value and reduce the discount and yield before long.
Since its inception in 2004 the Reaves Utility Income closed end fund has been a great income investment for investors seeking income and capital growth in a low-risk investment. The objective of the fund is “to provide a high level of after-tax total return consisting primarily of tax-advantaged dividend income and capital appreciation. It intends to invest at least 80% of its total assets in dividend-paying common and preferred stocks and debt instruments of companies within the utility industry.”
At 6/30/2017 the fund’s portfolio consisted of 24% multi-utilities, 22% electric utilities, 12% media companies, 12% diversified telecommunication services, 10% oil and gas, and 5% REITs. About 88% of portfolio investments were in US issues and 12% in foreign companies.
Since its inception in February 2004 the fund has returned an annual average of 12.17% at net asset value and 11.08% at market price, outperforming the S&P 500.
The fund paid its first dividend of $0.096 in April 2004 and has maintained or increased its dividend every month since including the challenging period of the Great Recession. The fund raised its dividend nine times over the years most recently in October 2016. The fund currently pays a dividend of $0.16 per month. As of 10/13/2017 the monthly income yield is 6.21%. The fund has paid a special dividend every December.
In addition to providing reliable monthly income, the fund has also grown investors’ capital. The fund grew its net asset value per share 4.6% per year on average from its offering price of $19.07 in 2004 to $33.43 now without any reinvestment of dividends.