Earn Up To 8% While Living The American Dream

seekingalpha04-12

We live in a highly competitive world.The global hustle to outperform, grow, and become more valuable for one's employer can be financially rewarding for the bystander.Two picks with up to ~8% yield ...

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The world is fiercely competitive for almost everything – the brand name of the school you go to, the university you attend, and the company you work for are closely judged by society. From middle school grades to university majors, every step is a race to secure a coveted position in the corporate ladder. Landing a job at global behemoths like Microsoft, Google, Amazon, or Apple is seen as a major achievement in this landscape, with terms like \"dream job,\" \"dream company,\" and “dream destination” often echoing through university halls. Amidst this hustle, thousands worldwide dedicate themselves to multinational corporations, bolstering their growth, profitability, and, ultimately, shareholder returns. As an income investor, I have the privilege of reaping the rewards of their labor – it's as if their efforts are tailored to secure my income. Without further ado, let’s discuss two picks that let you benefit from the hard work of millions around us. Pick #1: UTF – Yield 8.2% The recent collapse of the Francis Scott Key Bridge in Baltimore after a large cargo ship crashed into it highlights the importance of safeguarding and upgrading critical infrastructure regularly. U.S. infrastructure has been deteriorating for decades. The American Road & Transportation Builders Association has estimated that one in three U.S. bridges needs repair. Many structures that form the lifelines of the national economy, including connectivity to the busiest ports in the country, are over 50 years old. The associated impact on freight movement and logistical challenges are likely to result in inflationary effects on the public. “Older bridges are not designed with the post-Panama Canal expansion ship allowances in mind” – Maria Lehman, President, American Society of Civil Engineers. America’s critical infrastructure is quite exposed to sudden devastating accidents and intentional destruction, whether it is the bridge collapse, the cyber breach on Colonial Pipeline, or the cyberattack on American water utilities companies. Amidst the tragic loss of life, the disruption of the logistics from one of the nation’s busiest ports (prominent for coal and car imports) and the prospects of the largest-ever marine insurance payouts are a glimpse of glaring gaps in America’s critical infrastructure. The collapse of the Francis Scott Key Bridge will drive discussions about these gaps. Not only will there be a sense of urgency to rebuild the bridge, but we expect the combination of public and private sector investments to establish measures to safeguard it. In BlackRock’s (the world’s largest asset manager) annual letter to investors, CEO Larry Fink describes the firm’s deep focus on infrastructure as being at the center of its next transformation. The company has long fretted over the gap between public sector demand for funding and private sector demand for good investments. In February, the firm announced the acquisition of Global Infrastructure Partners, which owns London’s Gatwick Airport, among other big facilities that “keep the lights on, planes flying, trains moving, and cell service at the maximum number of bars.” Mr. Fink suggests that the funding will have to be some combination of public and private dollars because it would be too much for the government alone. Cohen & Steers Infrastructure Fund (UTF) is one of the best beneficiaries of this importance, urgency, and the continued rollout of the bipartisan infrastructure law. The closed-end fund's, or CEF's, top ten holdings, which represent ~30% of the net assets, are comprised of some of the most prominent American firms essential for sustaining commerce and communications and ensuring the uninterrupted delivery of essential services. Source.   UTF Fact Sheet Moreover, UTF’s assets include regulated utilities, gas distribution, and midstream C-Corps in large proportions, providing much-needed inflation hedge and income stability.   UTF Fact Sheet UTF operates with a 30% leverage, offering the potential to accelerate the returns from this critical sector. 85% of the leverage carries fixed interest rates at a 1.8% weighted average rate with a weighted average term of 2.5 years. The total cost of all financing stood at a modest 2.5%, positioning UTF well to navigate the high-interest climate and refinance or deleverage on more favorable terms. The CEF pays $0.155/share, which calculates to an 8.2% annualized yield. Over the years, the distribution has been a healthy mix of long-term capital gains and Net Investment Income, with modest use of Return on Capital.   Author’s Calculation We expect massive infrastructure spending from several recently passed laws to reflect onto the income statements in the coming years, and the sector will see significant traction in light of recent events. UTF provides a comfortable vehicle to ride these tailwinds while collecting big monthly distributions. Pick #2: Realty Income – Yield 5.9% Life occurs in monthly cycles. Whether we’re talking about your rent, car payments, or your phone and utility bills, these come up every time the calendar turns a new page. So, it is only fair to expect income from our investments twelve times a year so we can tackle these expenses head-on. Hence, Realty Income Corporation (O), \"The Monthly Dividend Company,\" makes an excellent fit in our portfolio. Realty Income is the 5th largest global REIT (Real Estate Investment Trust) that enjoys cash flows from over 15,450 real estate properties managed under long-term net lease agreements with credit-worthy commercial clients. Realty Income’s properties are leased to over 1,300 tenants (40% of these are investment-grade) from 86 different industries, and the agreements have a 9.7-year remaining average lease term. Triple net leases allow the REIT to reduce exposure to rising costs associated with taxes, maintenance, insurance, and other operating expenses. Retail and industrial tenants comprise the bulk of the company’s portfolio. Source.   Realty Income Website 75% of Realty Income’s diversified real estate portfolio comprises non-discretionary, low price point, and service-oriented retail. Notably, 89% of total rent is resilient to economic downturns and remains isolated from e-commerce pressures. It is through this diversification and emphasis on tenant quality that the REIT’s portfolio occupancy has never gone below 96.6% in its 30-year history as a public company. O ended FY 2023 with a portfolio occupancy of 98.2%. Amidst high interest rates, when REIT valuations have taken a beating, Realty Income has been busy making deals and acquisitions. The REIT set an annual high in property level investment volume, closing on over $9.5 billion in high-quality, diversified investments across eight different countries and through 271 discrete transactions at a weighted average cash yield of 7.1%. During Q4, Realty Income struck a $527 million sale-leaseback transaction with Decathlon for its properties located in Germany, France, Spain, Italy, and Portugal, giving the REIT much-needed entry into these lucrative markets. Source.   Realty Income Website Notably, Realty Income has been highly selective in its transactions, having made an investment volume of $9.5 billion out of $59 billion in sourced opportunities. Realty Income maintains a fortress balance sheet in the REIT industry, rated A3/A- by Moody’s and S&P, with a 5.5x net debt to adj. Pro forma EBITare. 94% of the REIT’s debt carries fixed interest rates, with a weighted average term-to-maturity of 6.7 years. The REIT de-risked its 2024 maturity schedule through the recent ~$ $2.2 billion of bond issuance activity in a 45-day span. The combination of these two offerings results in a weighted average tenure of ~10.2 years and a weighted average yield-to-maturity of ~5.5%. Management believes that these offerings provide adequate funding and do not necessitate tapping into the debt capital markets in 2024. Realty Income is an excellent dividend steward with 29 years of consecutive payment raises. The REIT recently delivered a monthly raise to $0.257/share, calculating to a 5.9% annualized yield at current prices. Realty Income’s adjusted funds from operations, or AFFO, per share guidance range of $4.13 to $4.21 per share for 2024 represents an annual growth rate of 4.3% at the midpoint and places its current dividend at a sustainable 74% payout ratio. With the company’s recent expansion in Europe and the synergies realized from the acquisition of Spirit Realty, among other recent deals, the company is well-positioned to deliver growing payouts for the foreseeable future. Conclusion From the moment I discovered that companies pay dividends to their shareholders, I couldn't help but marvel, “So I'm getting paid just for holding on to these shares? This is incredible!” Delving into this elegant form of capital return, its sustainability, and its profound impact on wealth when combined with the magic of compounding, I was captivated and driven to incorporate it into my investment strategy. In our Investing Group, we call this approach the Income Method. It entails building a diversified portfolio of income-generating securities spanning various industry sectors. With investments in over 45 income-oriented securities, including BDCs, REITs, CEFs, ETFs, MLPs, C-Corps, preferreds, and bonds, it's likely that the hard work of individuals worldwide contributes to a portion of my income. We aim to generate 9% recurrent income per year from our dividends. UTF and Realty Income provide diversified exposure to tangible assets in the form of mission-critical infrastructure and real estate, essential to the functioning of modern society.  So, to all those aspirants, hard workers, and skilled individuals, I’ll say that I’m rooting for you. Now, go out there and earn me my dividends.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2426478182"}