James Carthew: Investors should look beyond GCP Infra’s steep discount
Infrastructure debt is not supposed to be exciting and, without being unkind to GCP Infrastructure (GCP), its 15-year track record illustrates that.
Investors who bought shares at launch in July 2010 for 100p saw its net asset value (NAV) fall to a low of 97.7p in June 2011 and then peak at 114.3p in June 2022. Currently, we are back at 100.3p, thus fulfilling the part of GCP’s objective that aims to preserve the capital value of its investment assets over the long term.
The other half of the objective is to provide shareholders with regular, sustained, long-term distributions. Once it was up and running, GCP was paying 7.6p per year in dividends.
However, when central banks and governments drove down interest rates in response to Covid, it was forced to cut that to 7.0p and it has been at that level ever since. All told, that adds up to 110.75p per share in dividends since launch, a 187% total return on NAV, or an average 7.3% per annum.
Back in July 2010, the yield on a 15-year gilt was 3.9%, so GCP’s portfolio has delivered an excess 3.4% per annum return over that after costs. The remarkable thing, I think, is that it has done so while lending against cash flows that are backed by the UK government or other public sector bodies.
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