ENB:CC - TPZ: Very Strong 3-Year Performance And A Decent Yield

2024-05-22 10:10:20 ET

Summary

• Tortoise Power and Energy Infrastructure Fund offers investors a high level of income without sacrificing capital gains potential.
• The TPZ fund has a yield of 7.97%, higher than major equity indices such as the S&P 500 and Dow Jones Industrial Average. It also compares well with its peers.
• Over the past three years, investors in the fund have realized a total return of 75.99%, outperforming the S&P 500 Index.
• The fund has managed to boost its distribution since our previous discussion. It is also fully covering it.
• The fund is currently trading at an enormous discount to net asset value.

Tortoise Power and Energy Infrastructure Fund ( TPZ ) is a closed-end fund, or CEF, that investors can purchase as a method of earning a high level of income from the assets in their portfolios without needing to sacrifice the capital gains potential of an investment in common equities. As regular readers can certainly attest, many of the highest-yielding closed-end funds that we have discussed in this column recently are funds that invest in either speculative fixed-income securities (such as junk bonds) or funds that invest in floating-rate leveraged loans. These are all different kinds of debt securities, and thus there is a limit to the potential capital gains that can be obtained from them. After all, interest rates cannot really go much below 0%, which limits the potential appreciation of any type of bond.

Floating-rate securities generally remain stable over time regardless of interest rates. Thus, the potential capital gains from these securities are limited as well. Tortoise Power and Energy Infrastructure Fund, on the other hand, invests in equity securities and common equities have no theoretical maximum upside. This is something that anyone who is trying to preserve their purchasing power in an inflationary environment should appreciate....

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