NEUBERGER BERMAN ENERGY INFRASTRUCTURE AND INCOME FUND ANNOUNCES MONTHLY DISTRIBUTION
- None.
- The Fund is subject to federal income tax on its taxable income, unlike most investment companies. Any taxes paid by the Fund will reduce the amount available to pay distributions to stockholders, and therefore investors in the Fund will likely receive lower distributions than if they invested directly in MLPs.
Insights
The declaration of a distribution of $0.0584 per share by Neuberger Berman Energy Infrastructure and Income Fund Inc. is a notable event for investors, as it directly impacts the yield on their investment. The fixed rate distribution model, while offering predictability, also necessitates close scrutiny of the Fund's distributable cash flow. This cash flow is dependent on a variety of factors such as the performance of underlying investments, including MLPs, common stocks and debt instruments.
Investors should be aware that the Fund operates differently from most investment companies by being subject to federal income tax on its taxable income, potentially reducing the distributable amount. Additionally, the component of the distribution that is classified as a return of capital is not a dividend but a return of the investor's original investment. This has implications for the investor's tax position, as it reduces the cost basis of their investment, thereby affecting capital gains or losses upon sale of the shares.
The tax implications for shareholders of the Fund are significant, especially considering the expected return of capital portion of the distributions. This aspect of the distribution can offer a tax advantage in the short-term by reducing taxable income, but it also has long-term consequences for shareholders' capital gains calculations. It is crucial for investors to understand that the return of capital lowers their cost basis in the Fund's shares, which could lead to higher capital gains taxes if the shares are sold at a profit in the future.
Furthermore, the Fund's unique tax position, being subject to federal income tax, contrasts with the tax-exempt status of most investment companies. This can result in lower distributions due to the Fund's tax liabilities. Investors should factor in these potential tax burdens when assessing the overall attractiveness of the Fund's distributions.
From an investment strategy perspective, the Fund's approach to regular monthly cash distributions reflects a commitment to providing shareholders with consistent returns. However, the sustainability of these distributions is contingent upon the Fund's investment performance and operational expenses, which includes the costs associated with leverage, if utilized. The reliance on distributable cash flow from a variety of income sources requires ongoing review and potential adjustment, indicating a need for active management and strategic oversight.
Investors should consider the Fund's distribution policy in the context of their overall portfolio strategy, taking into account the potential for reduced distributions due to the Fund's taxable status and the implications of return of capital distributions on their tax situation. The strategic allocation to such a fund should align with the investor's income requirements, tax considerations and risk tolerance.
The Fund currently intends to make regular monthly cash distributions to holders of its common stock at a fixed rate per share, to be determined based on the projected net rate of return of the Fund's investments as well as other factors, subject to ongoing review and adjustment from time to time. The Fund currently intends to pay its regular monthly distributions out of its distributable cash flow, which generally consists of (1) cash and paid-in-kind distributions from master limited partnerships ("MLPs") or their affiliates, dividends from common stocks, interest from debt instruments and income from other investments held by the Fund less (2) current or accrued operating expenses, including leverage costs, if any, and taxes on its taxable income.
The Fund expects that a portion of its distributions to stockholders will constitute a non-taxable return of capital. A "return of capital" is a distribution by the Fund which represents a return of a common stockholder's original investment, and should not be confused with a dividend. To the extent the Fund pays a return of capital, a common stockholder's basis in Fund shares will be reduced, which will increase a capital gain or reduce a capital loss upon sale of those shares. There is no assurance that the Fund will always be able to pay a distribution of any particular amount, or that a distribution will consist solely of the Fund's current and accumulated earnings and profits.
In compliance with Section 19 of the Investment Company Act of 1940, as amended, a notice would be provided for any distribution that does not consist solely of net investment income. The notice would be for informational purposes and not for tax reporting purposes, and would disclose, among other things, estimated portions of the distribution, if any, consisting of net investment income, capital gains and return of capital. The final determination of the source and tax characteristics of all distributions paid in 2024 will be made after the end of the year.
The Fund is subject to federal income tax on its taxable income, unlike most investment companies. Any taxes paid by the Fund will reduce the amount available to pay distributions to stockholders, and therefore investors in the Fund will likely receive lower distributions than if they invested directly in MLPs.
About Neuberger Berman
Neuberger Berman, founded in 1939, is a private, independent, employee-owned investment manager. The firm manages a range of strategies—including equity, fixed income, quantitative and multi-asset class, private equity, real estate and hedge funds—on behalf of institutions, advisors and individual investors globally. Neuberger Berman's investment philosophy is founded on active management, engaged ownership and fundamental research, including industry-leading research into material environmental, social and governance factors. Neuberger Berman is a PRI Leader, a designation awarded to fewer than
Statements made in this release that look forward in time involve risks and uncertainties. Such risks and uncertainties include, without limitation, the adverse effect from a decline in the securities markets or a decline in the Fund's performance, a general downturn in the economy, competition from other closed end investment companies, changes in government policy or regulation, inability of the Fund's investment adviser to attract or retain key employees, inability of the Fund to implement its investment strategy, inability of the Fund to manage rapid expansion and unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations.
Contact:
Neuberger Berman Investment Advisers LLC
Investor Information
(877) 461-1899
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SOURCE Neuberger Berman
FAQ
What is the distribution amount declared by Neuberger Berman Energy Infrastructure and Income Fund Inc. (NML)?
When is the distribution payable?
How does the Fund determine the rate of its regular monthly cash distributions?
What is a 'return of capital' in the context of the Fund's distributions?
What is the impact of federal income tax on the Fund's taxable income?
