Listed infrastructure offers diversity as dividends fall
Global listed infrastructure can offer self-directed investors diversity in their income holdings, which is critical given falling dividends in some of the traditionally popular Australian income stocks, according to Rare Infrastructure.
Rare senior portfolio manager Shane Hurst told SMSF Adviser that, given the importance of income stability for SMSF investors, global listed infrastructure stocks were worth considering given the security and diversification benefits offered.
“As an SMSF, what you want out of the income component of your investments is low volatility, limited downside and a nice stable income,” Mr Hurst said.
“You get a lot more stable outcomes from investing in essential services than you do from investing in domestic stocks like the banks which, while they have been stalwarts of income-generating stocks in the Australian market, in recent days have had a lot of volatility and are subject to the ebbs and flows of interest rates.”
Mr Hurst said the fund manager focused on “essential services” in its infrastructure income strategy, which were generally regulated utility companies that weren’t affected by ups and downs in the global economy.
“They are essential services because people always need to draw on water or turn the lights on or use gas to power their stoves, so you get these very stable cash flow outcomes from the assets, which translates to stable and growing dividends,” he said.
“You can also capture some upside in the market because elements of infrastructure are leveraged to growth in GDP, so if you are an airport or port, as GDP grows so will your traffic.”
Mr Hurst said the fund manager currently has 34 stocks in its income portfolio, which consists mainly of North American and European regulated utilities.
“We invest in Canadian utilities which provide good value and around 9 per cent of the portfolio, and we also see good opportunities in Europe where some of the utilities have been quite noisy through regulation changes, and as a result, we have been able to pick up holdings at good prices,” he said.