UTG vs. UTF: Navigating U.S. Infrastructure Tailwinds for Dividend Growth and Total Returns

The U.S. infrastructure landscape has entered a transformative phase, driven by surging electricity demand, policy tailwinds, and a capital investment super-cycle. From 2021 to 2025, the utilities sector has outperformed the broader market, with the S&P 500 Utilities Index rising 9.2% compared to the S&P 500's 6.2% return. This momentum is fueled by AI-driven data centers, transportation electrification, and manufacturing reshoring, all of which require robust energy infrastructure. Against this backdrop, investors must evaluate how funds like Reaves Utility Income Trust (UTG) and Cohen & Steers Infrastructure Fund, Inc (UTF) position themselves to capitalize on these trends while balancing risk and reward.

The Infrastructure Tailwinds: A Catalyst for Utilities and Beyond

The post-Trump policy environment has prioritized energy reliability and affordability, with initiatives extending coal plant lifespans, streamlining nuclear permitting, and incentivizing gas and clean energy development. These policies, combined with the Inflation Reduction Act's (IRA) tax credits, have spurred record capital expenditures in the utilities sector. By 2024, electric and gas utilities had invested $186.4 billion in grid modernization and generation capacity, with partnerships with tech giants like Amazon and Microsoft securing long-term power contracts.

The sector's appeal lies in its defensive characteristics: stable cash flows, regulated earnings growth, and a yield curve that has supported valuations. The 10-year Treasury yield's decline to 4.23% in 2025 has reduced financing costs, enabling utilities to expand rate bases and deliver 5–7% annual EPS growth. However, challenges persist, including execution risks in capital projects and regulatory uncertainties.

UTG: A Utility-Centric Play with High-Yield Potential

Reaves Utility Income Trust (UTG) is a closed-end fund focused on utilities, energy, and communication services, with a call/put overlay strategy to enhance returns. Its portfolio is heavily weighted toward regulated utilities, which benefit from rate base growth and predictable cash flows. UTG's dividend yield has declined from 8.07% in 2021 to 5.94% as of August 2025, reflecting a mix of share price appreciation and a strategic shift toward capital preservation.

UTG's expense ratio of 2.43% is relatively competitive, with a management fee of 0.71% and interest costs of 1.49% due to its leverage. While this structure has historically supported higher short-term returns (44.04% in the past year), it also exposes the fund to interest rate volatility. UTG's performance is closely tied to the utilities sector's regulatory environment and interest rate trends, making it a high-yield but potentially volatile option.

UTF: Diversified Infrastructure Exposure for Resilience

Cohen & Steers Infrastructure Fund, Inc (UTF) takes a broader approach, investing in infrastructure companies across energy, industrials, and transportation. Its portfolio includes pipelines, toll roads, airports, and telecommunications firms, offering diversification that mitigates sector-specific risks. UTF's dividend yield has remained more stable, declining modestly from 7.75% in 2021 to 6.87% in 2025.

UTF's expense ratio of 3.86% is higher than UTG's, driven by a 2.47% interest expense from its $950 million in debt. However, its diversified holdings and exposure to energy and industrials—sectors directly benefiting from infrastructure spending—position it to weather economic uncertainties. UTF's 10.12% yield in 2018 (before declining to 6.87%) highlights its ability to maintain income generation even during market stress.

Strategic Considerations: Balancing Yield, Risk, and Policy Impact

The post-Trump infrastructure policies have amplified the importance of diversification. UTF's broad infrastructure exposure aligns with the Bipartisan Infrastructure Law's emphasis on multi-sector investments, including energy resilience and transportation upgrades. Its holdings in pipelines and toll roads, for instance, benefit from long-term contracts and inflation-linked revenue streams.

UTG, while more concentrated in utilities, has leveraged its call/put overlay to generate alpha in a low-volatility environment. However, its performance is more sensitive to interest rate fluctuations and regulatory changes. For example, a rise in Treasury yields could compress utility valuations, impacting UTG's share price more acutely than UTF's diversified portfolio.

Investment Advice: Aligning with Long-Term Trends

For investors seeking income stability and resilience, UTF offers a compelling case. Its diversified infrastructure holdings and risk-adjusted performance metrics (e.g., a Sortino Ratio of 1.66 vs. UTG's 2.67) suggest it is better positioned to navigate macroeconomic uncertainties. UTF's exposure to energy and industrials also aligns with the IRA's clean energy incentives, ensuring long-term growth potential.

Conversely, UTG may appeal to those prioritizing short-term capital appreciation and willing to accept higher volatility. Its utility-centric strategy benefits from the sector's strong earnings growth and dividend yields, but investors must monitor interest rate trends and regulatory developments.

Conclusion: A Dual-Path Strategy for Infrastructure Investors

The U.S. infrastructure boom presents a unique opportunity for income-focused investors. UTG and UTF represent two distinct approaches: one focused on utility sector growth, the other on diversified infrastructure resilience. While UTG's high-yield potential and active management strategy offer short-term gains, UTF's broad exposure and risk mitigation make it a more sustainable choice in a policy-driven environment. Investors should consider their risk tolerance and time horizon when allocating capital, ensuring their portfolios align with the long-term tailwinds shaping the energy and infrastructure sectors.