HICL Infrastructure (HICL)

HICL Infrastructure (HICL) offers investors a core infrastructure investment targeting long-term NAV returns of 7–8% p.a. through a combination of a high dividend yield and the potential for capital and income growth. The portfolio is a balance of more traditional contracted infrastructure assets together with long duration growth-orientated assets, reflecting the evolution of the infrastructure market over the last two decades. The UK portfolio is approximately two thirds of the total, with the remainder in Europe, North America and Australia, all regions with strong legal frameworks around infrastructure investment. HICL is a FTSE 250 trust with a £3bn portfolio spread across multiple jurisdictions, infrastructure types and over 100 individual investments, and can legitimately claim to be the leading listed core infrastructure fund in Europe.

HICL’s dividend yield is currently 7.1%, boosted by the share price discount to NAV. Further, HICL is expected to return to dividend growth in the coming years, with the board having given guidance for increased dividends for the next two financial years, fully covered by cash from investments. Over the past five years the dividend has been held at the same level, with a range of factors at play, including the temporary effects of the pandemic on demand-based assets and higher debt costs, but also crucially for future NAV and dividend growth, capital has been deployed towards building out HICL’s lower yielding, but more growth-orientated investments.

The discount to NAV remains at around 25% and the board and manager have undertaken a series of disposals, totalling over £730m in the last two years, aimed at reducing HICL’s short-term borrowings and buying shares back. HICL has led the way with disposals in the peer group, which have all been at or above the most recent valuation prior to sale, indicating that the NAV is robust. With the valuation discount rate now standing at 8.5%, and a recent material reduction in management fees, HICL is well placed to deliver net returns within its target range, and any narrowing of the discount could deliver shareholder returns well above target.