NEUBERGER BERMAN ENERGY INFRASTRUCTURE AND INCOME FUND ANNOUNCES MONTHLY DISTRIBUTION
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Insights
The announcement by Neuberger Berman Energy Infrastructure and Income Fund regarding its distribution declaration is of interest to investors as it directly impacts shareholder returns. The fixed rate distribution suggests a stable income stream, which can be appealing for income-focused investors. However, the reliance on distributable cash flow, composed of various investment income streams minus operating expenses and taxes, indicates a potential variability in the payouts. The mention of distributions potentially including a non-taxable return of capital is significant. While this can provide immediate cash benefits, it also carries implications for the stockholder's tax situation and future capital gains calculations.
Investors should note that the Fund is subject to federal income tax, which is not typical for investment companies. This could result in lower distributions compared to direct investments in master limited partnerships (MLPs). The tax efficiency of MLPs is often a key reason investors choose them, so the Fund's tax burden might be a deterrent. The notice regarding compliance with Section 19 of the Investment Company Act of 1940 is also noteworthy, as it ensures transparency about the nature of distributions, allowing investors to make informed decisions.
From a taxation perspective, the Fund's expected distribution of a portion as a return of capital has implications for investors. A return of capital reduces an investor's cost basis in the Fund's shares, which can result in higher capital gains taxes upon the sale of those shares. This is a double-edged sword; it provides tax benefits in the short term by reducing taxable income but may lead to increased tax liabilities in the long term.
Investors should also be aware that the final determination of the source and tax characteristics of distributions is made post-year-end, necessitating careful tax planning. The Fund's unique status as being subject to federal income tax, unlike most investment companies, means that the net amount available for distribution may be less than expected. This could influence an investor's decision to invest in the Fund versus direct MLP investments, which are generally more tax-efficient due to their pass-through status.
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 is an employee-owned, private, independent investment manager founded in 1939 with 2,800 employees in 26 countries. The firm manages
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
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