ASGI's 12%+ Yield: A High-Risk, High-Reward Play Amid Reorganization and Premium Valuations

The abrdn Global Infrastructure Income Fund (ASGI) has long been a magnet for income-hungry investors, boasting a forward dividend yield of 12.14% as of September 2025. But with a market price trading at a 2.08% discount to net asset value (NAV) and a recent reorganization of the abrdn Japan Equity Fund (JEQ) into its portfolio, the question remains: Is this eye-popping yield sustainable, or is ASGI setting itself up for a payout crunch? Let's break it down.

The Yield's Foundation: Income, Gains, and Leverage

ASGI's November 2025 distribution of $0.21 per share is technically supported by a mix of net investment income (2%), short-term gains (49%), and long-term gains (49%). While the 2% income component is modest, the fund's ability to tap into capital gains-both short- and long-term-keeps the dividend afloat. This strategy isn't uncommon in closed-end funds, but it does raise red flags.

When a fund relies heavily on realized gains to fund distributions, it's essentially returning shareholders' capital, not earnings. That's a risky game if the market turns.

The fund's reorganization of JEQ into ASGI, approved by shareholders in June 2025, adds another layer of complexity. By merging JEQ's assets into its infrastructure-focused portfolio, ASGI gains exposure to Japanese equities, which could diversify its cash flows. However, the tender offer for JEQ was set at 98% of NAV, suggesting a potential discount to intrinsic value. If ASGI can unlock hidden value in these assets, it could bolster its income-generating potential. But if the reorganization fails to integrate smoothly, the fund's ability to sustain its payout could be compromised.

Premium Valuations: A Double-Edged Sword

ASGI's infrastructure focus-utilities, healthcare, and renewables-positions it to benefit from global megatrends like urbanization and energy transition according to market analysis. Yet its valuation metrics are cause for caution. A P/E ratio of 14.12 and a P/B ratio of 1.03 according to Gurufocus data suggest the market is pricing in robust future growth. But when a fund trades at a premium to NAV (or even a slight discount, as in ASGI's case), it's often a sign that investors are betting on management's ability to outperform. ASGI's Q3 2025 performance, however, was a dampener-it underperformed its benchmark. If the fund can't consistently deliver alpha, the premium could evaporate, dragging down the share price and forcing a cut in the dividend.

The Bottom Line: A High-Yield Gamble

ASGI's 12%+ yield is a siren song for retirees and income-focused investors, but it's not without risks. The fund's reliance on capital gains, coupled with its premium valuation and recent underperformance, means this payout is far from guaranteed. That said, the reorganization with JEQ and ASGI's alignment with infrastructure megatrends offer a glimmer of hope.

For the bold, ASGI could be a compelling play if you're willing to tolerate volatility. But for the risk-averse, it's a reminder that high yields often come with high stakes. As always, diversify and keep a close eye on the NAV.