Infrastructure is booming: Is the Cohen & Steers (UTF) ETF a buy?

By:
on Jun 6, 2024
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  • The Cohen & Steers Infrastructure Fund has jumped by over 11% this year.
  • Demand for infrastructural projects is booming in 2024.
  • The fund’s risks are its leverage and its huge expense ratio.

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The Cohen & Steers Infrastructure Fund (UTF) has done well this year as demand for infrastructure continued. It has risen by over 11%, beating the Reaves Utility Income Trust (UTG), which has jumped by just 5%. 

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Infrastructure demand is rising

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Infrastructure has become one of the fastest-growing industries in the financial services sector. In January, Blackrock struck a deal to buy Global Infrastructure Partners (GIP), a leading company in the industry. Private equity companies have continued to raise billions for their infrastructure funds.

Cohen & Steers is one of the most popular income plays on Wall Street. It has over $3.1 billion in assets under management (AUM). It has made most of its investments in the United States, Canada, Australia, and the UK. 

The biggest companies in the fund are the likes of American Tower Corporation, Southern Company, NextEra, PPL Corporation, and NiSource. Its constituents are in industries like electric power, corporate bonds, midstream, and gas distribution.

There are several reasons why the UTF ETF could do well in the future. First, governments are investing huge sums of money on infrastructure projects. In the United States, the government has launched infrastructure bills worth trillions of dollars. Europe and Asian countries are also pumping billions of dollars in infrastructure.

Second, the fund could benefit from the ongoing artificial intelligence (AI) trends around the world. Data centers and utilities are expected to benefit as demand for energy jumps. 

Further, the ETF has a substantial dividend yield of almost 8%, which is higher than what government bonds are offering. 

Still, there are several risks to be aware of. The most important risk is that this is a highly expensive fund with an expense ratio of 2.29%, which is higher than the average ratio of less than 0.16%. This means that a $100,000 investment will cost you over $2,200 each year. 

The other risk is that it is a highly leveraged fund, with a leverage ratio of 30.57%. While leverage can help to amplify returns, it can lead to substantial losses when things go wrong.

UTF ETF stock analysis

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UTF ETF

UTF chart by TradingView

The daily chart shows that the UTF stock price has rebounded in the past few months. It has surged from last year’s low of $17.15 to over $23.6. It recently rose above the crucial resistance point at $23.44, its highest swing in February last year.

UTF has remained above the 50-day and 100-day Exponential Moving Averages (EMA), which is a positive thing. It has also formed what looks like a triple-top pattern, which is usually a bearish sign. 

Therefore, the stock’s outlook is neutral with a bearish bias. This view will be invalidated if the stock moves above the year-to-date high of $23.77. A break above this level will point to more upside, with the next point to watch being at $25. 

The alternative scenario is where the triple-top pattern works out and the stock retreats to the key support at $22.50.

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