The Perfect Alternative Income Play for President Trump's $1.3 Trillion Infrastructure Plan

If the last 10 years has taught us anything, it's that investing alongside government stimulus will ensure returns.

Over the last decade, four major stimulus events have provided huge support to the stock markets.

Three rounds of quantitative easing pushed stocks to new records, and the Trump administration provided its extra charge in the form of corporate and individual tax reform. The Dow Jones Industrial Average soared 154.56% since the first quantitative easing in November 2008.

It might violate my economic views on free markets, but I'd have to be terribly hardheaded to not capture a share of my own tax money being thrown at the equity markets.

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While some analysts are saying that there isn't much value available in today's frothy market, or that a correction is in order, we're looking for opportunity from a fifth stimulus program.

Currently, the S&P 500's PE ratio is 25.53, according to From 1900 to 2017, the average PE ratio was 15.8, so this is quite the frothy market.

U.S. President Donald Trump's pending $1.5 trillion infrastructure plan might not provide a broad stimulatory impact on the equity markets like quantitative easing, but it certainly will provide targeted gains for investors who know where to look.

I'll explain why this stimulus program is different from the others, and then give you the perfect way to still make big gains from the Trump administration's infrastructure project with an alternative income play...

Shaking Up the Infrastructure Industry

Many will recall that the United States spent $787 billion in federal money in the American Recovery and Reinvestment Act of 2009. This was the first stimulus program since the onset of the Great Recession.

However, this federal stimulus program, as former U.S. President Barack Obama noted, created "shovel-ready" jobs that were "not so shovel-ready."

The Trump plan is different because of the way the deal is structured.

President Trump's plan calls for at least $1.5 trillion "to rebuild the nation's infrastructure and to develop innovative projects." But that $1.5 trillion figure only accounts for $200 billion of federal money; the rest comes from state governments and private capital.


President Trump Wants a $1 Trillion Infrastructure Bill

This means that the project will need to spur $1.3 trillion in spending from the private sector, cities, and states.

While states and cities will be looking to provide public services with their spending, private capital funds will be looking to make a return on their investment.

And they'll be given another way to get a return on their investments through infrastructure, too.

In a separate budget, the president's plan calls for federal agencies to have the authority to sell assets that might be better managed by private companies or local authorities. That means private investors will both get an incentive to take on public infrastructure projects and actually own some previously government-operated assets.

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This could shake up the equities markets in unique ways...

For example, in the United States, no publicly traded airports or toll road operators exist. These types of enterprises, however, are common in Europe.

The largest U.S. infrastructure fund - the Lazard Global Listed Infrastructure Portfolio - holds its largest stake in an Italian company called Atlantia Spa (OTCMKTS: ATASY), which manages Rome's airport and a large number of toll roads across Italy.

While introduction of similar equities in the United States will create exciting new opportunities in the market, finding value might not be so easy. It is worth noting that infrastructure projects and their associated returns on investment are heavily reliant on energy projects like oil pipelines, electricity distribution, and power turbines.

The problem is that utilities stocks are currently overvalued, which means you're paying more for your returns than you would in another sector.

The Dow Jones Utility Average currently trades at almost 20 times earnings and more than two times book value. Thanks to yield-chasing investors, the index currently yields just 3.49%.

Fortunately, we've done the hard work for you and found a way to get both value and access to these potentially lucrative projects...

The One Alternative Income Play to Make on Infrastructure

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While many analysts are speculating on which equities provide the most upside from President Trump's infrastructure plan, they're missing a slam dunk.

Over the weekend, I explained the value of closed-end funds and how following activist investors into these positions can provide you an unrivaled opportunity to capture both high yields and appreciation upside.

Activists like Philip Goldstein take stakes in closed-end funds at a discount to value. By taking positions in funds that are trading below their net asset value, he is buying something that the market says is "on sale."

The way he'll get a bigger return is to take an activist approach and prod the fund's management into taking actions, like share buybacks, which will boost the fund's price.

We're going to take a similar approach on infrastructure...

The fund we want to consider is Cohen & Steers Infrastructure Fund Inc. (NYSE: UTF). The diversified fund primarily consists of companies like tower builder Crown Castle International Corp. (NYSE: CCI), energy giant NextEra Energy Inc. (Nasdaq: NEE), pipeline play Enbridge Inc. (NYSE: ENB), and railroad titan Union Pacific Corp. (NYSE: UNP).

The fund currently pays a mouth-watering dividend of $1.86, which is a yield of 7.59%.

Trading at $21.19 per share, UTF is actually trading at a discount of roughly 11% to its net asset value of $24.19.

That's in part due to the fact that the company grew its net asset value by a little more than 24% in 2017.

The fund is comprised of 51% holdings from the United States, and it also provides significant upside to the ongoing infrastructure projects in nations like India, Canada, Japan, and Australia.

In February, these countries suggested that they may soon outline an alternative infrastructure project to rival China's multibillion-dollar Silk Belt and Road Initiative. The program would be aimed at countering China's rising influence on global trade.

But the real benefit is that we're going to trade alongside other institutional giants that have the potential to take the activist role and press for additional buybacks and dividend hikes.

Notable investors include Wells Fargo & Co. (NYSE: WFC) and JPMorgan Chase & Co. (NYSE: JPM), and it's unlikely they'll accept below-average returns. That's good for us.

I'm also pleased to see that firms with extensive experience in closed-end fund investing, like Ancora Advisors, Clough Capital Partners, and First Trust Advisors, are on the list of larger shareholders, as well.

The Bottom Line: The best alternative income play for President Trump's infrastructure plans is through Cohen & Steers Infrastructure Fund Inc. (NYSE: UTF). Not only are the catalysts for more revenue, but the dividend handsomely rewards shareholders, with its 7.59% yield.

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About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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