HICL is ready for the next twenty years.

Overview

Since its pioneering IPO two decades ago, HICL Infrastructure (HICL) has established itself as the leading core infrastructure trust, generating an NAV total return of 8.5% p.a. through different cycles, from both income and capital growth. A recent period of static dividends ended in the financial year ending 31/03/2026, and HICL’s board expects Dividends to 31/03/2028 to grow at an annualised 1.8%, while maintaining dividend cover at 1.1x.

Since HICL’s IPO, the infrastructure landscape has evolved and so has HICL, adding more diversified sources of return through different types of infrastructure across several geographies, alongside projects in different sectors and, selectively, at an earlier stage. Active management has also played a role, through project optimisation and judging when investments are ready for disposal. Increasingly, HICL’s investments, such as New Zealand’s FortySouth mobile towers business, are operating companies with capacity to grow, while retaining the key infrastructure characteristic of long-term stable and contracted revenues. HICL has therefore come a long way since its beginnings as a predominantly UK PFI investor.

In July 2026, the HICL team set out a detailed plan that, at a headline level, will gradually increase target medium-term returns from the 7–8% range set at IPO in 2006 to 10%. This builds on their record and is expected to be achieved while maintaining dividend growth and cover. Disposals of maturing assets and excess cashflows will be partly used to increase exposure to the new class of ‘enhancer’ assets, while c.80% of HICL’s portfolio is expected to remain in the familiar ‘yielder’ and ‘grower’ categories that have powered its long-term performance. This carefully thought-out plan reflects today’s long-term infrastructure opportunity landscape and, in the Portfolio section, we look at how HICL’s long-term performance includes significant contributions from both higher-returning investments and active management. The revised strategy could, therefore, be seen as a natural evolution of the team’s existing strengths and track record in a higher-rate environment.

Analyst’s View

One of the most striking numbers in HICL’s long-term performance is the comparison between its 20-year annualised NAV total return of 8.5% and the weighted average discount rate of 7.9% over the same period. In simple terms, discount rates give an indication of expected returns before fees. If the HICL team had achieved only what was modelled, the returns would have been less than 7% rather than the 8.5% actually achieved. The gap is explained by the team pulling the active management levers discussed above. As the revised strategy plays out, it seems very likely that HICL’s portfolio will come to include more of the types of investments that play to those strengths.

While the precise details of HICL’s plan for the next twenty years were revealed in July 2026, the direction has been clear for a while. The market has rewarded HICL with a significant share price rise this year as it starts to move past the end of the ‘bond proxy’ era that so heavily influenced HICL’s and peers’ share prices from 2022. That upward trajectory has continued since the announcement and puts HICL on a discount of under 15%. By the standards of the last twenty years that remains wide, but in a more recent context, it shows the success of HICL’s capital allocation policy, including share buybacks, and greater appreciation of HICL’s growth prospects. And, of course, a welcome return to dividend growth. If delivered, HICL’s plan for the next twenty years has the potential to reinforce its position as one of the UK’s leading listed infrastructure investment companies, while continuing to provide long-term income and capital growth for shareholders.

Bull

  • HICL has evolved to embrace the wider opportunity set of today’s infrastructure market and higher interest rates
  • Return to dividend growth
  • Discount has narrowed to a more sustainable level, although there is still work to be done

Bear

  • A higher return target has the potential to require more risk
  • Many of HICL’s investments are leveraged, which can amplify losses as well as gains
  • Rising interest rates and government bond yields could be a headwind

Current yield 6.2%, neither fish or fowl.