Reaves Utility Income Fund (UTG) Stock

UTG has significantly outperformed the market since my last buy rating earlier this year. However, it has pulled back sharply over the past week. I revisit the fund to see if it is a good buy on the dip.

Utilities sector CEFs such as Reaves Utility Income Trust offer a high yield, defensive income with professional management. The UTG closed-end fund boasts strong performance with a 29.7% YTD return and 35.7% 1-year return, outperforming the Utilities sector and S&P 500. This article details long and short-term performance, exposure to the Utilities sector, dividend growth, and yields for UTG and peers DPG, GUT, and MEGI.

Statement Pursuant to Section 19(a) of the Investment Company Act of 1940 DENVER, CO / ACCESSWIRE / November 29, 2024 / On November 29, 2024, the Reaves Utility Income Fund (NYSE American:UTG) (the "Fund"), a closed-end sector fund, paid a monthly distribution on its common stock of $0.19 per share to shareholders of record at the close of business on November 15, 2024. The following table sets forth the estimated amount of the sources of distribution for purposes of Section 19 of the Investment Company Act of 1940, as amended, and the related rules adopted thereunder.

Utility stocks have outperformed in 2024, driven by their durable 'hard assets' which offer investors long-tail value, inflation protection, and reduced competitive pressure. The Reaves Utility Income Trust is highly attractive due to its strong track record, high yield, and focus on utility and 'hard asset' investments. UTG's dual mandate aims for high income and total returns, and management has successfully produced just that since inception.

UTG has appreciated 20.98% YTD, benefiting from increased energy demand driven by AI and tech sector growth, offering a 7% yield. Despite risks from potential rate hikes and high debt profiles of its holdings, UTG's diversified portfolio and historical performance make it a strong income investment. Economic conditions, including declining rates and increased CapEx spending by tech companies, set a bullish outlook for UTG into 2025.

Reaves Utility Income Fund (UTG) has offered a stable distribution to investors, with what I believe is an attractive outlook to be able to continue that going forward. UTG has seen its shares run much higher since our last update, though it has only maintained the usual slight premium that it has seen for the past ~five years. Given the changing interest rate environment, that should continue to bode well for UTG as its borrowing costs start to ease.

Student accommodation developer Unite Group PLC (LSE:UTG) reported stronger rental growth for the new 2024/25 academic year but occupancy slightly below a year ago.  Like-for-like rental growth was 8.2% for the new batch of students, ahead of the 7% guidance given at the interims.

Utility stocks are highly sensitive to interest rates and often correlate with long-term bond prices, making them attractive as rates decline. UTG has recovered most losses since 2023, but its valuation remains high, with a significant portion of its distribution coming from capital gains. Utilities and gold are overvalued based on long-term real interest rate modeling; however, rates on long-term Treasury debt may be elevated due to increased monetary risk factors.

Reaves Utility Income Trust operates as a closed end fund that provides diverse exposure to utilities and infrastructure. The fund offers a high dividend yield of 7.7% with distributions being paid monthly. UTG's stable price-to-NAV relationship and tax-efficient distributions enhance its appeal for various investment account types.