Don't fall for the 'Expensive Defensives'

Investors have fallen for infrastructure stocks for the strong dividend yield they pay, which has become more and more attractive as the cash rate continues to fall. However, investors are seemingly ignoring the valuation they’re paying for these stocks, and are exposing themselves to significant risk. Companies in this sector typically carry very large levels of net debt, so when interest rates eventually rise, the cost of servicing this debt also increases. This threatens the sustainability of their dividend policies, and brings the whole investment thesis into question. In our report we also give our view on REITs, and why we believe value is a better place to be right now. By Nick Buisman. (VIEW LINK)