5 Best CEFs This Month For A 9% Yield (June 2024)

seekingalpha06-23

Olivier Le Moal In this monthly article, we try to identify five closed-end funds ("CEFs") that have a solid historical performance, pay high enough distributions, and offer reasonable valuations at ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2445055917?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1310121198/image_1310121198.jpg","is_english":true,"pubTime":"2024-06-23 21:00","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2445055917","market":"us","top_or_hot":-1,"title":"5 Best CEFs This Month For A 9% Yield (June 2024)","media":"seekingalpha","content":"<div>\n<p>Olivier Le Moal In this monthly article, we try to identify five closed-end funds (\"CEFs\") that have a solid historical performance, pay high enough distributions, and offer reasonable valuations at ...</p>\n\n<a href=\"https://seekingalpha.com/article/4700171-5-best-cefs-this-month-for-a-9-percent-yield-june-2024\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>5 Best CEFs This Month For A 9% Yield (June 2024)</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n5 Best CEFs This Month For A 9% Yield (June 2024)\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-23 21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4700171-5-best-cefs-this-month-for-a-9-percent-yield-june-2024><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Olivier Le Moal In this monthly article, we try to identify five closed-end funds (\"CEFs\") that have a solid historical performance, pay high enough distributions, and offer reasonable valuations at ...</p>\n\n<a href=\"https://seekingalpha.com/article/4700171-5-best-cefs-this-month-for-a-9-percent-yield-june-2024\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"ABBV","symbol_name":"艾伯维公司","start_time":0,"source_url":"https://seekingalpha.com/article/4700171-5-best-cefs-this-month-for-a-9-percent-yield-june-2024","article_id":"2445055917","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1310121198/image_1310121198.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2445055917","pubTimestamp":1719147600,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Olivier Le Moal In this monthly article, we try to identify five closed-end funds  that have a solid historical performance, pay high enough distributions, and offer reasonable valuations at the current time. We also present a more diversified list of the top 10 funds. Author's Note: This article is part of our monthly series that tries to discover the five best buys in the CEF arena at that point. Certain parts of the introduction, definitions, and sections describing selection criteria/process may have some commonality and repetitiveness with our other articles in this series. This is unavoidable and intentional to keep the entire series consistent and easy to follow for new readers. Regular readers who follow the series from month to month could skip the general introduction and sections describing the selection process . The new readers or those who need to familiarize with our detailed selection process should read our blog post here. Why Invest in CEFs?","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"ABBV":"艾伯维公司","EOS.AU":"ELECTRO OPTIC SYSTEMS HOLDIN","ETG":"Eaton Vance Tax-Advantaged Globa","OKE":"欧尼克（万欧卡）","AMGN":"安进","ET":"Energy Transfer LP","EOI":"Eaton Vance Enhanced Equity Inco","BANX":"StoneCastle Financial Corp","ABT":"雅培","LU1551013342.USD":"Allianz Income and Growth Cl AMg2 DIS USD","EOS":"Eaton Vance Enhanced Equity Inco","EPD":"Enterprise Products Partners L.P","BME.AU":"BLACK MOUNTAIN ENERGY LTD","BK4512":"苹果概念","USA":"Liberty All-Star Equity Fund","ABT.AU":"Abundant Produce","BSX.AU":"BLACKSTONE MINERALS LTD","BME":"BME信托","UNH":"联合健康","LU2264538146.SGD":"Fullerton Lux Funds - Global Absolute Alpha A Acc SGD","IFN":"印度基金","CII":"CII基金","SCD":"LMP Capital & Income Fund","MSFT":"微软","AAPL":"苹果","LU0882574055.USD":"富达全球健康医疗A ACC","XFLT":"XAI Octagon Floating Rate & Alternative Income Term Trust","LLY":"礼来","BSX":"波士顿科学","AVGO":"博通","KIO":"KKR Income Opportunities Fund","IFN.AU":"Infigen Energy","EPD.AU":"Empired Ltd","CSQ":"CSQ基金"},"translate_title":"本月5只最佳CEF，收益率为9%（2024年6月）","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"US10Y.BOND":1,"ETG":1,"IFN":1,"IFN.AU":1,"AAPL":1,"LLY":1,"MSFT":1,"OKE":1,"SCD":1,"UNH":1,"KIO":1,"US12M.BOND":1,"US2Y.BOND":1,"US30Y.BOND":1,"US3Y.BOND":1,"US5Y.BOND":1,"US6M.BOND":1,"US7Y.BOND":1,"USA":1,"XFLT":1,"BME.AU":1,"ABBV":1,"ABT":1,"ABT.AU":1,"AMGN":1,"AVGO":1,"BANX":1,"BME":1,"ET":1,"BSX":1,"BSX.AU":1,"CII":1,"CSQ":1,"EOI":1,"EOS":1,"EOS.AU":1,"EPD":1,"EPD.AU":1,"US912797GB79.BOND":0.6,"US912797GK78.BOND":0.6,"US912797GL51.BOND":0.6,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6},"content_text":"Olivier Le Moal In this monthly article, we try to identify five closed-end funds (\"CEFs\") that have a solid historical performance, pay high enough distributions, and offer reasonable valuations at the current time. We also present a more diversified list of the top 10 funds. Author's Note: This article is part of our monthly series that tries to discover the five best buys in the CEF arena at that point. Certain parts of the introduction, definitions, and sections describing selection criteria/process may have some commonality and repetitiveness with our other articles in this series. This is unavoidable and intentional to keep the entire series consistent and easy to follow for new readers. Regular readers who follow the series from month to month could skip the general introduction and sections describing the selection process (please skip to \"Narrowing Down To 50 Funds\"). The new readers or those who need to familiarize with our detailed selection process should read our blog post here. Why Invest in CEFs? For income-focused investors, closed-end funds remain an attractive investment class that offers high income (generally in the range of 6 to 10%, often 8% plus), broad diversification (in terms of the number of holdings and variety of asset classes), and market-matching total returns in the long term, if selected carefully and acquired at reasonable price points. A $500K CEF portfolio can generate nearly $40,000 yearly compared to a paltry $8,000 from the S&P 500. Now, if you were a retiree and needed to use all the income (generated by the CEF portfolio), the portfolio probably would grow marginally or not grow much. Even then, it beats investment vehicles like annuities without some of their downsides. However, if you can withdraw 5% or less while re-investing the rest of the yield into the original fund (or new funds), the total return could exceed 10% over a long period. That said, the goal here is to earn a high income or boost the income yield of an otherwise diversified portfolio. If your current spending needs are comfortably met with less than 3% income yields, you may be better served with a well-diversified traditional DGI (dividend growth investing) portfolio instead. We also write a monthly series to identify \"5 Safe and Cheap DGI\" stocks. You can read our most recent article here. Nevertheless, if you are an investor in CEFs, it's important to be aware of the risks and challenges of investing in CEFs. We list various risk factors and how to mitigate them towards the end of this article. Like most other investments, these investments are not suitable for everyone, so please carefully consider your goals, income needs, and risk tolerance. Our Five Best CEFs To Consider Every Month This series of articles attempts to separate the wheat from the chaff by applying a broad-based screening process to 500 CEF funds followed by an eight-criteria weighting system. Ultimately, we're presented with about 30-40 of the most attractive funds to select the best five. However, please note that we do not consider funds with fewer than five years of history. We use our multi-step filtering process to select just five CEFs from around 500 available funds. We also include a list of the top 10 funds for readers looking for a wider selection and diversification. This is our regular series on CEFs, where we highlight five CEFs that are relatively cheap, offer \"excess\" discounts to their NAVs, pay reasonably high distributions, and have a solid track record. Please note that these are not recommendations to buy but should be considered as a starting point for further research.  The selected five CEFs this month (plus a bonus candidate), as a group, are offering an average distribution rate of over 9% (as of 06/14/2024). Besides excellent distributions, these funds have a proven past record over the short and the long term and collectively returned 7.59%, 10.89%, and 8.62% in the last three, five, and ten years. The leverage for the group, on average, is very low, at 6.8%. The current average discount (to NAV) is also very attractive, roughly at nearly -7.7%. Since this is a monthly series, some selections may overlap from month to month. We believe a well-diversified CEF portfolio should contain at least 10 CEFs, preferably from different asset classes. It's also advisable to build the portfolio over a period rather than invest in one lump sum. A CEF portfolio can be an important component of the overall portfolio strategy. One should preferably have a DGI portfolio as the foundation, and the CEF portfolio could be used to boost the income level to the desired level. How much should one allocate to CEFs? Each investor needs to answer this question himself/herself based on his/her personal situation and factors like the size of the portfolio, income needs, risk appetite, or risk tolerance. Criteria to Shortlist:   Criteria Brings down the number of funds to... Reason for the Criteria   Baseline expense < 2.5% and Avg. Daily Volume > 10,000 Approx. 435 Funds We do not want funds that charge excessive fees. Also, we want funds that have fair liquidity.   Market capitalization> 100 Million Approx. 400 Funds We do not want funds that are too small.   Track record/ History longer than five years (inception date 2016 or earlier) Approx. 375 Funds We want funds that have a reasonably long track record.   Discount/Premium < +7% Approx. 350 Funds We do not want to pay too high a premium; we want bigger discounts.   Distribution (dividend) Rate > 5% Approx. 250-290 Funds The current distribution (income) is reasonably high.    5-Year Annualized Return on NAV > 0% AND/OR 3-Year Annualized Return on NAV >0%  Approx. 200-240 Funds We want funds with a reasonably good past track record in maintaining their NAVs.   Click to enlarge After we applied the above criteria this month, we were left with 253 funds on our list. From here on, we apply our other criteria to narrow the list. Note: All tables in this article have been created by the author (unless explicitly specified). Most of the data in this article are sourced from Cefconnect.com, Cefa.com, and Morningstar.com. Narrowing Down To 50 Funds To narrow down the number of funds to a more manageable count, we will shortlist ten funds based on each of the following criteria. After that, we will apply certain qualitative criteria to each fund and rank them to select the top five. At this stage, we also eliminate certain funds with substantial negative NAV returns for both three-year and five-year periods. Seven Broad Criteria:  Excess discount/premium (explained below). Distribution rate. Return on NAV, last three years (medium-term). Return on NAV, last five years (long term). Coverage ratio. Excess return over distributions. The total weight (calculated up to this point).  Excess Discount/Premium: We certainly like funds that are offering large discounts (not premiums) to their NAVs. But sometimes, we may consider paying near zero or a small premium if the fund is otherwise great. So, what's important is to look at the \"excess discount/premium\" and not the absolute value. We want to see the discount (or premium) relative to their record, say 52-week average. Subtracting the 52-week average discount/premium from the current discount/premium will give us the excess discount/premium. For example, if the fund has the current discount of -5%, but the 52-week average was +1.5% (premium), the excess discount/premium would be 6.5%. Excess Discount/Premium = Current Discount/Premium (Minus) 52-Wk Avg. Discount/ Premium. So, what's the difference between the 12-month Z-score and this Excess Discount/Premium measurement? The two measurements are quite similar, maybe with a subtle difference. The 12-month Z-score would indicate how expensive (or cheap) the CEF is in comparison to the 12 months. The Z-score also considers the standard deviation of the discount/premium. Our measurement (excess discount/premium) compares the current valuation with the last 12-month average. We sort our list (of 253 funds) on the \"excess discount/premium\" in descending order. For this criterion, the lower the value, the better it is. So, we select the top 10 funds (most negative values) from this sorted list. (All data as of 06/14/2024.) Table 1: Author High Current Distribution Rate: After all, most investors invest in CEF funds for their juicy distributions. We sorted our list on the current distribution rate (descending order, highest at the top) and selected the top 10 funds from this sorted list. Table 2: Author Medium-Term Return on NAV (last three years): We then sort our list on a three-year return on NAV (in descending order, highest at the top) and select the top 10 funds. Please note that too many MLP funds topped the list this month (and the past few months) on the 3-year performance list, but they were still negative or flat over 5-year or 10-year periods. For this reason, we kept only a couple of them on this list. Table 3: Author Five-Year Annualized Return on NAV: We then sorted our list on the five-year return on NAV (in descending order, highest at the top) and selected the top 10 funds. Table 4: Author Coverage Ratio (Distributions Vs. Earnings): The coverage ratio is derived by dividing the earnings per share by the distribution amount for a specific period. Please note that in some cases, the coverage ratio may be a bit inaccurate since the \"earnings per share\" may be three to six months old. But in most cases, it's fairly accurate. Also, the coverage ratio is not significant for pure equity funds as they generate very little dividend income, and they cover most of their distributions from capital gains. So, we sorted our list on the coverage ratio and selected the top 10 funds. Table 5: Author Excess Return Over Distribution: If a fund provides a very high distribution but low returns over 3, 5, or 10-year periods, it does not help the long-term interests of the investor. That is why we calculate a factor we like to call \"excess return.\" This excess return is what is provided by the fund over and above the distribution rate over a specified time period. We calculate it by subtracting the distribution rate from the three-year NAV return. In this list, we included the top 10 funds. Table 6: Author Total Weight (Quality Score) Calculated Up to This Point: Note: The Total Weight calculation is not fully completed at this point, since we have not considered the 10-year NAV return. Also, we will need to adjust the weight for the coverage ratio at a later stage. However, we select the top 15 names based on current calculations. Table 7: Author From the above selections, we now have 75 funds in total (tables 1-7). We will need to see if there are any duplicates among them. In our current list of 75 funds, there were 26 duplicates, meaning there are funds that appeared more than once. The following names appear twice (or more): Appeared twice: BANX, BKT, BST, CSQ, ETY, IFN, IIF, QQQX, XFLT (9 duplicates). Appeared three times: BGR, CII, GAM, MXF, NML (10 duplicates). Appeared four times: HGLB (3 duplicates). Appeared five times: STK (4 duplicates). So, once we remove 26 duplicate rows, we are left with 49 (75- 26) funds. Note: It may be worthwhile to mention here that just because a fund has appeared multiple times does not necessarily make it an attractive candidate. Sometimes, a fund may appear multiple times simply for the wrong reasons, like a high current discount, high excess discount, or a very high distribution rate that may not be sustainable. However, during the second filtering stage, it may not score well on the overall quality score due to other factors like poor track record. That said, if a fund has appeared four times or more, it may be worth a second look. Narrowing Down to Just 10 Funds In our list of funds, we already may have some of the best probable candidates. However, so far, they have been selected based on one (or two) criteria that each may be good at. That's not nearly enough. So, we will apply a combination of criteria by applying weights to eight factors to calculate the total quality score and filter out the best ones. We will apply weights to each of the eight criteria:  Baseline expense (Max weight 5) Current distribution rate (Max weight 7.5) Excess discount/premium (Max weight 5) 3-YR NAV return (Max weight 5) 5-YR NAV return (Max weight 5) 10-YR NAV return or 10-YR Total return (Max weight 5, if less than ten years history, an average of three and five-year returns) Excess NAV return over distribution rate (Max weight 5) Adjusted Coverage Ratio (Max weight 7.5): Before we apply the weight for the coverage ratio, we like to adjust it for certain factors. The adjustment is performed based on the type of fund to provide fair treatment to certain types, like equity and sector funds. We know that equity and some sector funds do not earn much investment income and largely depend upon the growth of their holdings. In contrast, fixed-income funds usually have enough investment income to cover their distributions. For this reason, we assign some bonus points to certain types of funds, which, by their make-up, depend on capital gains to fund their distributions, to bring them to par with fixed-income funds. These fund types include Equity/ Sector equity (two bonus points), real estate (two points), and covered call (two points). However, please note that this is just one of nine criteria that are being used to calculate the total quality score.  Once we have calculated the weights, we combine them to calculate the \"Total Combined Weight,\" also called the \"Quality Score.\" The sorted list (spreadsheet) of 49 funds on the \"combined total weight\" is attached here. File-for-export_-_5_Best_CEFs_-_June_2024.xlsx 10-Positions Portfolio of The Month Before we get to the final five, we will narrow down our list from 49 names to 20 names. So, we sorted our table of roughly 50 names based on sector and then the quality score. Also, in this round of selections, we mostly pick one or two top funds from each sector (based on quality score). There is a bit of subjective judgment, as we tend to prioritize funds that pay regular and consistent distributions on a monthly or quarterly basis. We also weed out any fund that may have a poor track record in terms of NAV performance. Funds that may have inconsistent dividends (even if they are high) generally do not make it to our top list. Also, be aware that many times, single-country funds score high in our rankings, but most of them pay variable dividends on an annual or semi-annual basis. In addition, being single-country funds, they can be inherently riskier since their future returns are tied to just one country, be it economic, regulatory, or geopolitical factors. For these reasons, they generally do not make it to our top 5 lists, but they do appear on our list of 20. Individual investors could consider them based on their goals. Here's the list of the top 20 selections (from different asset classes): Table 8: Author From here on, we will have to perform some subjective judgment and narrow the list to 10 names. Here's the list of the top 10 selections this month (in order of sector): (IFN), (EOI), (SCD), (ETG), (KIO), (BANX), (BME), (XFLT), (CSQ), and (USA). Table-8B: Author Final Selection: Our List Of Final Top 5 5-Positions Portfolio of the Month: So far, we have followed our filtering criteria to a large extent. However, in the end, if we only want to select five funds, we will need to apply our subjective judgment. As such, for new CEF investors, our list of top 10 selections (table-8B) is quite compelling and makes a more diversified list. While we narrow down this list to five, we should be mindful to keep the list as diversified as possible in terms of asset classes. Since this step is mostly subjective, the choice would differ from person to person. Nonetheless, here are the selections for this month, based on our perspective (in order of Quality Score): Current month selections:  BlackRock Health Sciences (BME), Eaton Vance Enhanced Equity Income (EOI), LMP Capital and Income (SCD), ArrowMark Financial Corp (BANX), Liberty All-Star Equity (USA).  Table: The Final 5 Funds: Table 9: Author Some information about the selections: We recommend that readers look at the top 10 and 5 lists. The top-10 list offers much more of a diversified lot compared to the top 5). The distribution amount per share for both groups is highly attractive at 9% or higher. BME (BlackRock Health Sciences) BME is offered by BlackRock Group and is a healthcare-focused equity fund. It also employs call-option writing to generate additional income. Currently, this fund is attractive due to a high discount of over -10% compared to roughly -6% over the past year but nearly zero discount over a 5-year period. In addition, the fund supports a very decent long-term performance track record. The fund is fairly diversified with over 135 holdings and invests in big and well-known healthcare companies such as Eli Lilly (LLY), UnitedHealth (UNH), AbbVie (ABBV), Boston Scientific (BSX), Abbott Labs (ABT), and Amgen (AMGN). Some of its top holdings, for example, UNH and ABT, have underperformed recently, and that has impacted the fund’s recent performance. However, the long-term prospects of these companies remain strong. We think this fund is a buy due to the unusually high discount for this fund. EOI (Eaton Vance Enhanced Equity Income) Similar to the last few months, we had numerous covered-call funds appear in our top 50, but we finally narrowed it down to just a couple of funds. This month, we had to decide between BlackRock Enhanced Capital and Income (CII) and two of the very similar Eaton Vance funds. The two Eaton Vance funds are Eaton Vance Enhanced Equity Income (EOI) and Eaton Vance Enhanced Equity Income II (EOS). These two are practically the same, with similar holdings and similar strategies. However, they differ from CII in some respects. We are selecting EOI this month in our top 5, but you could very well have EOS with no difference. We also like CII, but you have to settle for a much lower yield compared to EOI or EOS. EOI is heavily concentrated in the technology sector, with nearly 33% exposure, and its top holdings include most of the so-called 'Magnificent Seven' names. The distribution yield is very attractive at nearly 8.5%, and the past performance record is solid. The fund uses no leverage, and its expenses are comparable to those of its competitors. Even though the discount to NAV is small at -3.25%, it is still 0.72% better than its 52-week average. SCD (LMP Capital and Income): As of June 15, 2024, the fund offered a 6.8% discount; though the discount has narrowed a bit in the last few months, it is still attractive. SCD is a fairly diversified and balanced fund invested mostly in equities and has major allocations in Energy, Technology, and the REIT sectors. CEFConnect (which gets the data from Morningstar) shows it under the category of \"Global Allocation,\" and the fund has the mandate to invest in equity and fixed-income securities both in domestic and international markets. However, we like to call it a “Balanced Equity Income” fund. As for global, it only has a 7% allocation (currently) directly to international companies. That said, most S&P500 companies have a lot of exposure to international markets. The fund is designed to provide the returns that match the S&P500. Overall, besides growth, the fund is income-focused and invests in many companies and sectors that are known to provide high income, such as MLPs, REITs, and Utilities. For growth, it has allocated roughly 18% to the technology sector. For example, in its top 10 holdings, there are three tech companies, Microsoft (MSFT), Apple (AAPL), and Broadcom (AVGO), but it also has four major MLPs such as Energy Transfer (ET), Enterprise Products (EPD), ONEOK (OKE), and Sunoco LLP. The fund currently yields 8.80%. BANX (ArrowMark Financial Corp): This fund has been appearing on our list for the last several months. It is included this month as well. Compared to last month, the price has come down a bit, and the yield has become even better. The current yield is 9.88%, and shares are trading at over 14% discount. It invests to a large extent in regulatory capital relief securities (87% of the total) but also in preferred equity, subordinated debt, convertible securities, and common equity. The primary objective is to provide a steady high income and, more or less, a stable NAV. It offers investors exposure to floating rate instruments that have been benefiting from the rise in interest rates. This should also appeal to investors who like the distribution to be well covered by their investment income. However, please keep in mind that with close to 10% distribution income, there is not much scope left for capital gains, but we do get special distributions now and then. Also, the fund is currently trading at a 14.3% discount to its NAV, which provides some margin of safety. The fund raised its quarterly dividend from $0.39 to $0.45 a share in October 2023. There is some concern that with rates starting to decline in 2024 and 2025, the fund's investment income may go down (due to exposure to floating-rate instruments), but those issues may be overblown. First, it appears that rates are going to stay higher for longer. Even when the rates come down, they are not going back to zero (barring some black swan events). Also, since it uses a modest level of leverage, lower rates also reduce its interest expense. Further, the management appears to be confident they will be able to manage the investment income over and above the distributions even when the rates do go down, as it did okay during the 2020-22 zero rates environment. In 2023, the fund covered its regular and special distribution fully, and, as the annual report stated, \"For the full year ended December 31, 2023, BANX had total investment income of $28.7 million and net operating expenses of $10.0 million. This resulted in a net investment income of $18.7 million or $2.63 per share based on average shares outstanding during the year. The Fund had realized and unrealized gains of $1.6 million, or $0.21 per share. During the year, ArrowMark Financial declared distributions of $2.20 per share.\"  USA (Liberty All-Star Equity): The fund seeks total investment return by investing in large-cap equity holdings, with 90% invested in the US market. Its returns are comprised of long-term capital appreciation and current income. The fund is highly diversified and currently holds 147 positions. It invests at least 80% of its assets in equity securities, while it could invest the balance 20% in short-term money market instruments. According to the fund's literature, \"The fund strategy combines three value-style and two growth-style investment managers. These managers demonstrate a consistent investment philosophy, decision-making process, continuity of key people, and above-average long-term results compared to managers with similar styles.\"  This fund has been in business since 1986 and has a pretty good record of nearly matching the performance of the S&P500 over different time periods. However, the main advantage for income investors is the consistent 10% income (2.5% of NAV every quarter). Since the fund is actively managed and has a 0.93% fee, it does underperform the S&P500 slightly, from 0.5% to 1.5% over long periods of time. You can read our detailed report on this fund here. A Bonus Candidate for the month: The India Fund (IFN) We will add this fund as a bonus candidate to the list of five. This fund has been appearing for quite some time in our top 20 (or top 10), but we were hesitant to include it in the top 5. The reason was that it is a country-specific fund, so there are always some additional risks. These risks include currency risks and the trajectory of the growth or lack of growth of a specific country’s economy. So we would not recommend this for everyone. Please use your due diligence. We include this as a bonus candidate as the fund is quite appealing at this time. It pays high income (yield over 10%), paid on a quarterly basis. The growth has been quite decent as well due to the growing Indian economy, despite the subpar performance of other emerging markets. The fund is currently being traded at a large discount of roughly -10% due to its recent rights offering. The fund had either traded at a premium or near zero discount over the last 52 weeks. However, the 5-year average discount has been around -7%. So, it appears to be a good value at this time. Table 9A: The Final 5 Plus the Bonus Candidate: Author CEF-Specific Investment Risks It goes without saying that CEFs generally have some additional risks. This section is specifically relevant for investors who are new to CEF investing, but in general, all CEF investors should be aware of it. Leverage and high fees: They generally use some amount of leverage, which adds to the risk. The leverage can be hugely beneficial in good times but detrimental during tough times. The leverage also causes higher fees because of the interest expense in addition to the baseline expense. In the tables above, we have used the baseline expense only. If a fund is using significant leverage, we want to ensure that the leverage is used effectively by the management team - the best way to know this is to look at the long-term returns on the NAV. NAV is the \"net asset value\" of the fund after counting all expenses and after paying the distributions. So, if a fund pays high distributions and maintains or grows its NAV over time, it should bode well for its investors. Volatility: Due to leverage, the market prices of CEFs can be more volatile, as they can go from premium to discount pricing (and vice versa) relatively quickly. Especially during corrections, the market prices can drop much faster than the NAV (the underlying assets). Investors who do not have an appetite for higher volatility should generally stay away from CEFs or at least avoid the leveraged CEFs. Premium over NAVs: CEFs have market prices that differ from their NAVs (net asset values). They can trade either at discounts or at premiums to their NAVs. Generally, we should avoid paying any significant premiums over the NAV prices unless there are some compelling reasons. Asset-specific risk: Another risk factor may come from asset concentration risk. Many funds may hold similar underlying assets. However, this is easy to mitigate by diversifying into different types of CEFs ranging from equity, equity-covered calls, preferred stocks, mortgage bonds, government and corporate bonds, energy MLPs, utilities, and municipal income. Concluding Thoughts We use our screening process to highlight five likely best closed-end funds for investment each month. At the same time, we also provide a larger list of ten CEFs from many different asset classes. Our filtering process demands that our selections have an above-average long-term performance record, offer an average of roughly 8% distributions, and are relatively cheaper with reasonable discounts. The selected five CEFs this month (plus a bonus candidate), as a group, are offering an average distribution rate of over 9% (as of 06/14/2024). Besides excellent distributions, these funds have a proven record over the short and the long term and collectively returned 7.59%, 10.89%, and 8.62% in the last three, five, and ten years. The leverage for the group, on average, is very low, at 6.8%. The current average discount (to NAV) is also very attractive, roughly at nearly -7.7%. Since this is a monthly series, some selections may overlap from month to month.  Please note that these selections are based on our proprietary rating system and are dynamic in nature. So, they can change from month to month (or even week to week). At the same time, some funds can repeat from one month to the next if they remain attractive over an extended period. Also, note that if a fund has not made it to our list, it does not mean it is not good. It could be because they may not be attractively priced at this time or trading at a premium while running our filtering process.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2445055917"}