This Unloved AI Fund Pays Monthly Dividend (And Yields 7.9%)

Core Viewpoint - The Cohen & Steers Infrastructure Fund (UTF) is highlighted as a strong investment opportunity in the AI sector, offering a monthly dividend of 7.9% and positioned to benefit from the increasing demand for electricity driven by AI technologies [3][4]. Investment Opportunity - UTF is characterized as a "tollbooth" play on AI, focusing on companies that provide essential infrastructure such as servers, transmission lines, and power plants, rather than direct investments in tech giants like NVIDIA or Microsoft [4]. - The fund's holdings include approximately 35% in utilities, 18% in gas distributors and pipelines, and 15% in corporate bonds, which are expected to perform well as interest rates decline [6]. Market Context - Data centers, which are crucial for AI operations, currently account for about 4% of U.S. electricity consumption, a figure that is projected to rise significantly [5]. - The utilities sector has outperformed the S&P 500 this year, driven by AI's increasing power demands, with the Utilities Select Sector SPDR Fund (XLU) showing strong performance [8]. Performance History - Since its acquisition in November 2020, UTF has returned 40%, and in its previous cycle from 2016 to 2019, it nearly doubled in value [7][8]. - The fund is currently trading at a steep discount to its net asset value (NAV), presenting a unique buying opportunity [10]. Market Dynamics - The discount in UTF's trading price is attributed to investor fears of dilution following a share issuance, which has led to a sell-off despite the fund's solid performance [10][11]. - CEFs like UTF can experience prolonged discount periods, allowing for strategic buying opportunities that may not be available in more liquid markets [15].