Duff & Phelps Utility and Infrastructure Fund Inc. Announces Share Repurchase Program, Monthly Distributions and Discloses Sources of Distribution Section 19(a) Notice
Duff & Phelps Utility and Infrastructure Fund (NYSE: DPG) has announced a share repurchase program and a change in its distribution frequency. The fund aims to buy back up to 5% of its outstanding shares at a discount to net asset value (NAV) by June 2025. This initiative seeks to enhance shareholder value and reduce the discount at which its shares trade.
Additionally, the fund will shift from quarterly to monthly distributions, maintaining the same quarterly amount but distributing $0.07 per share monthly starting July 2024. This adjustment is based on shareholder feedback and trading analysis. The fund's June distribution is solely a return of capital, with no net investment income or capital gains included.
The fund's financial performance includes a 2.87% average annual total return on NAV over five years and a 7.32% annualized current distribution rate as a percentage of NAV.
- Share repurchase program aims to buy back up to 5% of outstanding shares at a discount to NAV by June 2025.
- Shift to monthly distributions may attract more shareholders based on feedback and peer analysis.
- Maintains quarterly distribution amount through monthly payments, providing consistent income for shareholders.
- Fund's five-year average annual total return on NAV is 2.87%.
- Annualized current distribution rate as a percentage of NAV is 7.32%.
- Cumulative total return on NAV for the fiscal year is 20.14%.
- June distribution is entirely a return of capital, indicating no net investment income or capital gains.
- 100% of the current quarterly distribution and 97.8% of year-to-date distributions come from return of capital.
- Share repurchase program is discretionary and may not purchase shares at any particular discount levels or amounts.
- Monthly distributions rely on realized capital gains or return of capital if investment income is insufficient.
- Repurchase activity subject to market conditions and federal securities law limitations.
Insights
The announcement of the share repurchase program and the change to monthly distributions is aimed at enhancing shareholder value. The repurchase program is designed to reduce the discount to the Fund's NAV by repurchasing up to
The change from quarterly to monthly distributions is also a strategic move to attract potential shareholders. Monthly distributions provided more regular income, which could be appealing to income-focused investors. However, it's important to recognize that the distribution sources are currently
Overall, these measures could provide short-term boosts in shareholder value, but the reliance on return of capital for distributions may be a concern for long-term sustainability.
The Fund's strategic shift to monthly distributions aligns with a growing trend among closed-end funds to offer more frequent payouts, catering to demand from income-seeking investors. This trend reflects an understanding of investor preferences, as more frequent distributions can potentially stabilize the Fund's share price by providing regular income streams, thereby attracting a larger pool of investors.
However, the reliance on return of capital for these distributions is concerning. It is essential to consider the long-term implications of such a strategy. While the immediate income might seem attractive, the return of capital decreases the Fund's asset base, which could affect future income generation capacity and overall Fund performance.
The share repurchase program is a positive signal, as it suggests the Fund is taking active steps to address the discount to NAV. However, the impact of this program will largely depend on execution and prevailing market conditions. Investors should keep an eye on the actual repurchase activity disclosed in annual and semi-annual reports.
These moves indicate a proactive approach by the Fund to enhance shareholder value, yet they also bring to light underlying challenges around the sustainability of distributions primarily funded by return of capital.
At its regular June meeting, the Board adopted a share repurchase program that seeks to enhance shareholder value by purchasing shares of the Fund in the open market at a discount to NAV. The program, which is effective immediately, could result in incremental accretion to the Fund’s NAV and is expected to enhance value for the Fund’s shareholders. The Fund is authorized to purchase, on a discretionary basis, up to
The Board also changed the frequency of distribution payments from quarterly to monthly. The quarterly and annualized distribution amounts will remain the same, but the previous quarterly rate of
The Board has authorized payment of the first three monthly distributions on common stock, as shown in the table below.
Per Share Amount |
Ex-Date |
Record Date |
Payable Date |
|
July 31, 2024 |
July 31, 2024 |
August 12, 2024 |
|
August 30, 2024 |
August 30, 2024 |
September 10, 2024 |
|
September 30, 2024 |
September 30, 2024 |
October 10, 2024 |
The Fund adopted a Managed Distribution Plan (the “Plan”) in 2015. Under the Plan, the Fund will distribute all available investment income to its shareholders, consistent with the Fund’s investment objective. If and when sufficient investment income is not available on a monthly basis, the Fund will distribute realized capital gains and/or return of capital to its shareholders in order to maintain the monthly
The following table sets forth the estimated amounts of the Fund’s June quarterly distribution to shareholders of record at the close of business on June 17, 2024 (ex-date June 17, 2024), payable June 28, 2024, together with the cumulative distributions paid from the first day of the fiscal year to this month end from the following sources. All amounts are expressed per share of common stock based on
Distribution Estimates |
June 2024 (QTD) |
Year-to-Date (YTD) |
||||||
(Sources) |
Per Share
|
Percentage
|
Per Share
|
Percentage
|
||||
Net Investment Income |
$ |
0.000 |
|
$ |
0.014 |
|
||
Net Realized Foreign Currency Gains |
|
0.000 |
|
|
0.000 |
|
||
Net Realized Short-Term Capital Gains |
|
0.000 |
|
|
0.000 |
|
||
Net Realized Long-Term Capital Gains |
|
0.000 |
|
|
0.000 |
|
||
Return of Capital (or other Capital Source) |
|
0.210 |
|
|
0.616 |
|
||
Total Distribution |
$ |
0.210 |
|
$ |
0.630 |
|
||
As of May 31, 2024 |
|
|
Average annual total return on NAV for the 5 years |
|
|
Annualized current distribution rate as a percentage of NAV |
|
|
Cumulative total return on NAV for the fiscal year |
|
|
Cumulative fiscal year distributions as a percentage of NAV |
|
|
The Fund will issue a separate 19(a) notice at the time of each distribution using the most current financial information available. You should not draw any conclusions about the Fund’s investment performance from the amount of these distributions or from the terms of the Plan.
The Fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.”
The amounts and sources of distributions reported in this notice are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund’s investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. The Fund or your broker will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
About the Fund
Duff & Phelps Utility and Infrastructure Fund Inc. is a closed-end investment management company whose investment objective is to seek total return, resulting primarily from (i) a high level of current income, with an emphasis on providing tax-advantaged dividend income and (ii) growth in current income, and secondarily from capital appreciation. The Fund seeks to achieve these objectives by investing primarily in equities of domestic and foreign utilities and infrastructure providers. Under normal market conditions, the Fund will invest at least
About the Investment Adviser
Duff & Phelps Investment Management Co. is a boutique investment manager that specializes in listed real asset strategies for institutional and individual clients. An affiliated manager of Virtus Investment Partners, Inc. (NYSE: VRTS), the firm began in 1932 as a fundamental research firm and has been managing assets since 1979. The firm seeks to provide specialty investment strategies that enhance client outcomes through active portfolio management and customized solutions, utilizing a process with values that include quality, reliability, and specialization. Investment strategies include
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DPG Fund Services
(866) 270-7598
duff@virtus.com
Source: Duff & Phelps Utility and Infrastructure Fund Inc.
FAQ
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