Miller/Howard Investments
Miller/Howard Infrastructure Series
Part 1: Infrastructure
Miller/Howard's approach to listed Infrastructure.
Bryan Spratt, CFA, Portfolio Manager/Research Analyst
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Miller/Howard started dividend-focused investing with the launch of the Miller/Howard Infrastructure strategy in 1991 following our landmark study comparing utilities to bonds. This study examined a 45-year period from 1945 to 1990 and highlighted the superior risk adjusted returns that could be found by investing in equities that provide quality income and income growth.

When I'm asked, "What does Miller/Howard do?" I simply say that our primary focus for over a quarter of a century has been to deliver high and growing stream of income from equities. We believe getting paid in regular, real-time intervals in the form of cash dividends and using the power of compounding in a more purposeful way are good things to focus on when investing in the stock market. Put simply, we like to see our clients get a raise every year, regardless of the normal ups and downs in the stock market.

The Miller/Howard Infrastructure strategy is a diversified portfolio of US listed global infrastructure assets and enablers. We view the portfolio in five investment buckets: utilities, including water, gas, and electric; global communications; energy infrastructure; transportation and logistics; and, finally, enablers, which are the companies that help facilitate and/or build out infrastructure.

The portfolio is US centric, with a minimum of 80% of the assets in what we call foundational infrastructure, which are the assets that society simply can't live without. The strategy also has the flexibility to invest up to 20% in enablers. The portfolio attributes include a lower correlation to the broad equity markets, higher yield, and inflation protection through rising dividends.

The infrastructure space is very fertile soil for healthy and growing dividends. We think an increase in clients' overall asset allocation to defensive essential service companies like these infrastructure companies is a good thing. These are durable business models, often monopolies or monopolistic in nature. They're physical, tangible assets that have very visible earnings power and cash flows. These long duration assets are defensive in nature and provide a qualitative risk metric in a world of uncertainty and challenges. These attributes drive the fact that they are often referred to as SWAN, or sleep well at night stocks.

At its core, infrastructure can be defined as the essential services and foundational assets in society that make up the backbone of the economy. When you think about your home, it's hard to imagine not having electricity, heat in the winter, or air conditioning to stay cool in the summer. When you think about going from place to place, the transportation infrastructure is the backbone, whether it be the highway system or bridges, supported by all of the energy infrastructure that is required just to fill up your gas tank.

Finally, infrastructure includes logistics, which are the hands and feet of e-commerce. Everybody talks about the impact of online purchasing on brick-and-mortar retail companies, but without the transportation and logistics network, e-commerce wouldn't be a possibility. These are some of the categories and areas that we focus on in the Miller/Howard Infrastructure portfolio.

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DISCLOSURE

Investment products: are not FDIC insured - May lose value - Are not bank guaranteed

Opinions and estimates offered constitute Miller/Howard Investments' judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. All investments carry a certain degree of risk, including possible loss of principal. It is important to note that there are risks inherent in any investment and there can be no assurance that any asset class will provide positive performance over any period of time. The material may also contain forward-looking statements that involve risk and uncertainty, and there is no guarantee they will come to pass.

The information above is from sources deemed to be reliable and is provided strictly for the convenience of our investors and their advisors. These materials are solely informational. Legal, accounting and tax restrictions, transaction costs and changes to any assumptions may significantly affect the economics of any transaction. The information and analyses contained herein are not intended as tax, legal or investment advice and may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal, investment or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability. Any investment returns, past, hypothetical or otherwise, are not indicative of future performance. Investment Decisions: Do not use this report as the sole basis for investment decisions. Do not select an allocation, investment discipline or investment manager based on performance alone. Consider, in addition to performance results, other relevant information about each investment manager, as well as matters such as your investment objectives, risk tolerance and investment time horizon.

Past performance does not guarantee future results.

© 2017 Miller/Howard Investments.

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