DNP - DNP: Unsustainable Strategy In The Higher For Longer Environment

2024-04-29 11:18:00 ET

Summary

• DNP Select Income Fund focuses on high-quality utility and energy infrastructure investments, with a majority of its exposure in publicly traded utility companies.
• The fund has a diversified portfolio of large-cap utility businesses with mostly IG balance sheets, which can accommodate stable distributions.
• However, DNP has failed to grow its dividend for over two decades and has underperformed the market over the past decade.
• Now, once the SOFR is this high and the higher for longer scenario looks indeed realistic, DNP's return prospects seem structurally impaired.
• In this article, I elaborate on why my recommendation is to avoid this CEF.

The DNP Select Income Fund ( DNP ) is a utility and energy infrastructure-focused closed-end management investment company, which has been publicly traded since 1987. DNP's primary investment objectives are current income and long-term growth of income, with a secondary objective being price appreciation of its unit price....

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