Easy Income Portfolio: January 2025 Update

The past month has been a rollercoaster ride for investors, with markets taking a beating across the board. From December 15 to January 15, the S&P 500 dropped 4.33%, the Nasdaq fell 4.71%, and small-cap stocks got hammered, tumbling around 8%. The bond market wasn’t spared either, with long-term Treasury bonds diving 7.67%. Even the typically resilient triple-B corporate bonds fell 3.4%, though high-yield bonds held up better, declining just 1.5% to 1.8%.

It’s been a challenging period for traditional stock-and-bond investors. Yet the Easy Income Portfolio proved its mettle. While broader markets stumbled, the portfolio declined only 2.5%, supported by its robust 9.38% dividend yield. This yield towers over Treasuries, junk bonds, and the S&P 500. The key? A diversified mix of high-quality, income-generating investments spread across sectors that zig when others zag.

Sector Highlights:

1. Mortgage REITs (REM): These took a significant hit, down 8.65%, reflecting broader challenges in real estate debt markets.
   
2. Nuveen Real Asset Income and Growth Fund JRI: Declined notably, despite its diversified exposure to real assets like infrastructure, real estate, and energy. The fund’s holdings in premier companies such as Simon Property Group, Realty Income, and Energy Transfer illustrate its high-quality asset base.
   
3. Aberdeen Asia-Pacific Income Fund: Down 6%, this closed-end fund offers exposure to high-grade sovereign and corporate debt in the Asia-Pacific region, acting as both a dollar hedge and an income-generating asset.
   
4. Business Development Companies (BDCs): BDCs like Ares Capital, Blackstone Secured Lending, and FS KKR Capital remain core holdings. These entities leverage their deep private equity relationships to maintain credit quality and deliver strong dividends.
   
5. Energy Infrastructure: Investments like Dorchester Minerals and Tortoise Energy Infrastructure have performed well, capturing benefits from increased energy demand and the reorganization of global energy markets.
   
6. Closed-End Fund and SPAC Arbitrage: Exposure to these strategies helps add diversification and reduce overall volatility.

Mortgage REITs: A Tough Month Mortgage REITs (REM) bore the brunt of market turbulence, dropping 8.65%. That’s not a fun number to see, but it’s par for the course in a volatile interest rate environment. These REITs, which invest in residential and commercial mortgage securities, remain a core piece of the portfolio, offering high yields to counterbalance periods of price volatility.

Real Asset Income: A Hidden Opportunity The Nuveen Real Asset Income and Growth Fund (JRI) also faced pressure, declining around 8%. This fund gives you a one-stop shop for exposure to real assets, including infrastructure, real estate, and energy. Think Simon Property Group, Realty Income, Energy Transfer, and Enbridge—some of the best operators in their respective fields.

Simon Property Group Simon Property Group SPG is the premier operator of Class A malls in the United States, owning high-end shopping centers in affluent, densely populated areas. Unlike struggling Class B and C malls, Simon’s properties thrive as destinations for luxury shopping, dining, and entertainment.

Simon maintains high occupancy rates, typically in the mid-90% range, driven by the desirability of its properties. Its tenant base spans luxury brands and experiential anchors, reinforcing its status as the leader in mall-based real estate.

Realty Income Known as “The Monthly Dividend Company,” Realty Income owns over 13,000 properties across the U.S. and Europe. These properties are leased to high-quality tenants under long-term triple-net leases, where tenants cover taxes, insurance, and maintenance.

Key tenants and sectors include:

• Convenience Stores: 7-Eleven
  
• Pharmacies: CVS Walgreens
  
• Big Box Retailers: Home Depot HD Walmart WMT
  
• Entertainment and Dining: AMC Theatres AMC Chick-fil-A

Enbridge ENB is one of North America’s largest energy infrastructure companies. Its extensive asset base includes over 83,000 miles of crude oil, natural gas, and liquids pipelines that span Canada and the U.S. Enbridge also operates natural gas utility businesses, serving millions of customers in Ontario and Quebec, and is a leader in renewable energy investments, with wind and solar farms contributing to its diversified energy portfolio.

Energy Transfer Energy Transfer owns a vast network of energy infrastructure assets, including 120,000 miles of pipelines for natural gas, crude oil, natural gas liquids, and refined products. The company operates major storage facilities, processing plants, and export terminals, including the Marcus Hook Industrial Complex, a key hub for exporting natural gas liquids to global markets.

One of Energy Transfer’s standout assets is its LNG export capability, which positions the company to benefit from growing global demand for U.S. liquefied natural gas. Its pipelines and storage facilities are critical links in the supply chain, ensuring the movement of energy products from production basins like the Permian and Marcellus to end users.

These infrastructure giants, Enbridge and Energy Transfer, play essential roles in the energy economy, transporting and storing the resources that power homes, businesses, and industries. Their scale, diversified revenue streams, and regulated nature make them resilient income generators, which is exactly what we seek in the Easy Income Portfolio.

Asia-Pacific Debt: A Dollar Hedge Aberdeen Asia-Pacific Income Fund also had a rough month, down 6%. This closed-end fund invests in high-grade sovereign and corporate debt from countries like Australia, India, and Indonesia. With 13% dividend yields and limited default risk, it’s a great income producer and a natural hedge against a weakening U.S. dollar.

Business Development Companies: A Core Strength The portfolio’s BDC holdings, including Ares Capital, Blackstone Secured Lending, and FS KKR, continue to shine. These firms lend to small and mid-sized businesses, a segment set to thrive under pro-business policies. Their private equity relationships provide a massive competitive edge, ensuring they know the borrowers inside and out. Add in an 11% yield, and these BDCs are delivering exactly what we want—steady income with a margin of safety.

The Easy Income Philosophy The Easy Income Portfolio isn’t about chasing short-term gains or checking prices daily. It’s about creating a low-volatility, high-income portfolio that practically runs itself. With positions across 15 sectors, from infrastructure and energy to private credit and real estate, the portfolio delivers reliable cash flow through monthly dividends.

This month showed why diversification and a focus on income are essential. Even as markets faltered, the Easy Income Portfolio kept humming along, providing a steady income stream while staying positioned for long-term success.