This Fund Could Pay You A 7% Dividend For Decades To Come

Pump Jack, Oilfield, Oil, Fuel, Industry, Petroleum

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As the aftershocks of the Russia-Ukraine conflict play out, it's becoming clear that our energy crisis is not some kind of transitory event, as the Fed originally claimed. We're looking at a new normal, a "new world order" that's going to be with us for years or even decades.

In fact, OPEC estimates that oil and gas demand will increase by about 20%, from 90.6 million barrels a day in 2020 to 108.2 million barrels a day in 2045.

On top of that, we're still facing the biggest oil supply shortage the world has had in decades. The International Energy Agency's original projections from a few months ago were so dire, that it released an emergency action plan to reduce the demand that included things like - and I'm serious here - "car-free Sundays" in large cities.

I have been screaming from the hilltops since late 2020 that energy infrastructure - pipelines, gathering stations, rail depots, port terminals, storage yards, and processing facilities - were going to continue seeing floods of cash. That was before current events led to massive shifts in the market, and now demand is higher than ever.

Also, thanks to the "not in my backyard" syndrome in the United States, very little new oil and gas infrastructure will come online anytime soon, driving up the value of existing facilities.

A lot of money is going to be made in owning these companies and master limited partnerships (MLPs) that own these assets.

I have a closed-end fund pick that makes it easy for any investor to profit from the "new normal" in traditional energy, letting you own a piece of the entire sector for much less than it would cost to buy individual stocks.

Forget building a custom energy portfolio - this one ticker has everything you need...

 

A Complete Energy Investment Solution

Tortoise Energy Infrastructure Corp. (NYSE: TYG) owns most of the significant MLPs and C-corporations that are in the energy infrastructure business. According to its fund description page, the fund must invest at least 90% of total assets in securities of energy infrastructure companies and invest at least 70% of total assets in equity securities of MLPs.

Here are just some of the companies in the fund's portfolio:

  • Enterprise Product Partners LP (NYSE: EPD) has 50,000 miles of pipelines; 260 million barrels of storage capacity for natural gas liquids, crude oil, refined products, and petrochemicals, and 14 billion cubic feet of natural gas storage capacity, as well as a marine transportation business.
  • MPLX LP (NYSE: MPLX) has an enormous collection of assets, including its network of crude oil and refined product pipelines, a shipping business, light-product terminals, storage caverns refinery tanks, docks, loading racks, and associated piping, and crude and light-product marine terminals.
  • Williams Companies Inc. (NYSE: WMB) owns 30,000 miles of pipelines, 34 processing facilities, nine fractionation facilities, and approximately 23 million barrels of NGL storage capacity located on major supply basins around the United States.

You get the idea.

But the robust portfolio is only one of the benefits you get with TYG. It's an industry pioneer that was among the first investment firms dedicated to listed energy investments and formed the first listed MLP closed-end fund in 2004. So the management team has decades of experience in this market.

And because shares of TYG trade as regular stocks, you don't end up with a lot of the tax headaches that you'd get from owning MLPs directly. The yields come to you in the form of ordinary dividends, so no K1's, no multi-state tax returns.

And those yields, by the way? Averaging 7.68% since Q1 of 2020, with the kind of stability you can only get from a fund that owns irreplaceable assets which reliably produce cash payments.

This performance profile is why Saba Capital, a known closed-end fund activist firm, started buying up shares of TYG in the fourth quarter of 2021.

But the biggest reason this is a must-buy is the large discount to the net value of the assets TYG owns. Closed-end funds like TYG are traded on the stock exchange and are subject to the stock market's psychological soup. No one is marketing these funds to new money. There are no ads on Facebook or in the Barron's urging folks to buy the shares.

As a result, shares of Tortoise Energy Infrastructure trade for over 18% less than the value of the stocks and bonds it owns, which means you can buy a significant percentage of the energy infrastructure in the United States for a huge discount over the direct purchase.

So, there you have it: a high-demand asset, solid yields, experienced fund management, few tax hassles, and it's much cheaper than building a custom portfolio. TYG checks off all the boxes.

See disclaimers here.

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