A significant investment from abroad can be seen as a strong endorsement, especially when a Canadian pension fund is channeling £8 billion into the British market. The Caisse de dépôt et placement du Québec (CDPQ), managing £254 billion, is increasing its stake in UK equities, which is noteworthy given the historical skepticism towards Britain.

Investors may ponder the reasons behind CDPQ’s focus on uncovering bargains in the UK stock market. According to Charles Emond, the CEO of CDPQ, the UK government’s plans under Chancellor Rachel Reeves to enhance infrastructure spending present a “huge opportunity,” and the fund aims to engage at the cusp of development.

Although CDPQ may not be widely recognized in the UK, it ranks among the world’s largest infrastructure investors, boasting an existing portfolio of British assets valued at £17 billion, including the London Array Offshore Wind Farm in the Thames Estuary.

For individual investors like myself, the affirmation from such a prominent Canadian fund regarding UK infrastructure is exciting. Greencoat UK Wind (with the stock ticker UKW) stands out in my investment portfolio as one of the highest-yielding assets, offering over 8.9% in tax-free dividends.

The other strong performer in my investments is Tufton Assets (SHPP), a ship leasing investment trust listed on the London Stock Exchange. However, it is important to note that neither of these investments has excelled in capital appreciation, with one still underperforming.

Specifically, I purchased shares of Greencoat for £1.45 in August 2023, while the current price is £1.14. Tufton shares that I bought for 86p in August 2021 are currently priced at 87p.

Like CDPQ, I am keen on generating long-term income for retirement rather than fixating on short-term capital value changes. Notably, independent analyst Morningstar reports that Greencoat has grown shareholder income by an average of 7.6% annually over the past five years, with Tufton increasing its distributions by 5.7% in the same timeframe. If these growth rates can be maintained, Greencoat shareholders could see their income double in under a decade, while Tufton might take nearly 13 years to achieve the same.

Potential investors should remain cautious as dividends are not guaranteed and can be reduced or eliminated at any time. Nonetheless, income-focused investors might find it appealing that Greencoat shares are currently trading at a notable 25% discount to their net asset value (NAV), while Tufton is nearly 19% below NAV.

Infrastructure investments, such as essential electricity generators, can help maintain the real value of money amidst persistent inflation. Utility costs may rise to reflect the diminishing purchasing power of money, even if such adjustments are politically sensitive.

This sentiment applies equally to shareholder income, which can stir public sentiment. While financially strained households may oppose energy price hikes, those reliant on stock market income for their pensions might view such increases more favorably.

Ultimately, the perspective on infrastructure investments can vary depending on one’s situation. Although not guaranteed, investments in this area can offer some level of inflation protection. For instance, Greencoat has managed to raise dividends in line with the retail prices index since its initial public offering in 2013.

However, there is also concern that the NAV data might be misleading. Opposition to wind farms exists, creating political risks, and the costs associated with turbine repairs or replacements may surpass initial estimates. Similarly, the resale values of second-hand ships could decline unexpectedly.

Additionally, in my “forever fund,” the investment trust Ecofin Global Utilities (EGL) may offer less dividend income than either Greencoat or Tufton, but it provides better capital appreciation and is currently my sixth most valuable holding. I initially invested in this fund in March 2011 when it was known as Ecofin Water & Power Opportunities. I acquired shares for £1.52 in September 2019, while they are now priced at £2.12, with a 3.9% yield that has increased by 5% on a similar basis.

With approximately one-third of its assets located in the United States and 14% in Italy—slightly more than the 11% allocated to the UK—Ecofin offers a degree of international diversification that helps to mitigate political or regulatory risks domestically.

Those relying on government-backed pensions may dismiss the significance of dividends. However, nearly everyone in the private sector is dependent on defined contribution pensions, which are inherently tied to the stock market.

The Canadian pension fund’s commitment to UK infrastructure highlights the potential for these assets to yield attractive returns. Nonetheless, caution is warranted as substantial income today may come at the cost of minimal or stagnated growth in the future. A high yield that appears too good to be true should be approached with skepticism.

Renewed Interest in Yorkshire Power Shares

After a period of declining interest, could a small renewable energy firm based in Yorkshire provide noteworthy returns again? ITM Power (ITM) specializes in creating machines that convert electricity, often generated by wind energy, into hydrogen through electrolysis.

Storing and transmitting hydrogen presents substantial challenges due to its atomic structure. However, electrolysis can become economically viable, particularly when energy independence is prioritized, or there is excess energy generated by wind farms.

This company holds a special place in my investment strategy; I purchased shares at 41p back in January 2010, subsequently selling for a profit at 56p the following year. I reinvested in January 2020 at £1.24, injecting two percent of my life savings.

Despite facing skepticism from some quarters regarding its viability, my investment was encouraged by the fact that a prominent billionaire was also involved.

Then, unexpectedly, the share price surged to £5.39 in January 2021, allowing me another profit-taking opportunity. This proved fortuitous as concerns about the company’s profitability led to a downturn, with prices dropping below 30p earlier this year.

However, recent surges in the sales of ITM’s electrolysis units have revitalized investor interest, with shares rising 40% since January. Optimistic about its potential, I purchased more shares at 50p on Wednesday, with prices reaching 58p on Friday.

Skepticism is common in the stock market, but it’s essential to recognize that continual pessimism may not be the most profitable mindset.