Global utility and infrastructure assets provide the framework for economic growth and social development. They are the core and the essence of a modern economy. Growth of the global economy and markets is dependent on the services they provide.
Many studies indicate that we are at the beginning of the largest wave of investment in real productive assets the world has ever seen. In the developed world, there is a need to upgrade or replace aging roads, water plants, and the power grid. In developing countries, there is an acute demand for new electricity, water, sanitation, roads, bridges, etc.
Diversification / Exotic Beta
The utilities, infrastructure, and enablers in our portfolio are typically low-correlated investments that provide above-market cash flows from dividends, growth from rising dividends, and the potential for growth of principal. Historically, our portfolio has produced excess return versus the broad market since inception, without adding comparable risk.
Miller/Howard Infrastructure provides both rising income and growth, and seeks to participate in the stability and dynamic growth of essential services and infrastructure worldwide. The stability arises from the fact that utilities and infrastructure are in constant demand and continuously generating revenues. The growth is due to expanding populations and demographic shifts that drive more usage. In the developing world, growth arises as economies push toward a developed-world standard of living.
Global utility and infrastructure assets provide the framework for economic growth and social development. They are the core and the essence of a modern economy. Growth of the global economy and markets is dependent on the services they provide. Many studies show that we are at the beginning of the largest wave of investment in real productive assets the world has ever seen. We believe utilities that should consistently generate rising revenues and rising dividends are those that are high-quality, low-cost producers; serve territories with a favorable competitive environment; and conservatively exploit new opportunities.
Our objective is to offer opportunistic growth potential combined with high and stable cash-flow yield with a portfolio that is not highly correlated to the broad equity market. The goal is to provide investors with a current stream of income, growth of income, and growth of the underlying principal.
The process begins with a universe of traditional utilities — providers of water, gas, electric, and telecommunications plus some enabling companies (waste disposal, natural gas and oil production, infrastructure equipment, and wireless communications companies). Rigorous financial analysis and environmental and social governance research converge to produce a list of eligible, financially strong candidates.
Portfolio holdings comprise companies that we evaluate as financially sound based on strong balance sheets and high-quality debt ratings, and are characterized by dynamic diversity within essential services and their supply chain. Global exposure is provided through exchange-traded ADRs (American Depository Receipts).
In addition to high financial strength, a low dividend payout ratio, and a history of dividend increases (for traditional utilities), a company should offer a congenial regulatory environment, a sound competitive business position, growth demographics, and an absence of visible risk.
Strategy Inception Date: September 1991
Portfolio Manager: MHI Investment Team
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