John Waggoner: Looking For Yield At A Fair Price? Try Preferred Stock From Closed-End Funds

Ted

FYI: Looking for yield in a closed-end fund these days is like buying a pen at Tiffany's — you'll get what you're looking for, but you'll pay an awful lot for it.
But the preferred stock offerings of many closed-end funds could be a lucrative way to get yield at a reasonable price.
Regards,
Ted
http://www.investmentnews.com/article/20161014/FREE/161019955?template=printart

Nick_de_Peyster

Ted, what do you think about the interest rate sensitivity of preferred stocks?

Nick de Peyster
http://undevaluedstocks.info

Ted

@Nick: There is an inverse relationship between interest rates and the price of preferreds – as interest rates rise, prices are expected to fall. However, the amount of the price change due to a change in interest rates is related to both the term to maturity and the dividend rate paid. In general, the longer the term to maturity, and the lower the dividend rate, the greater the interest rate risk and vice versa. Also, different types of preferred shares do not behave the same way in a changing interest rate environment.
Regsrds,
Ted

ron

Ted, in the mentioned article, I looked over the ideas by Waggoner, and I thought BWG looked reasonable and interesting until I saw it has been ROC this year but nav has held up well with a managed distribution. Any thoughts on this Ted? Thank you.

fundalarm

not ted, but all emerging market debt funds have done well this year, especially the leveraged ones. this thing is as risky as they come and its distribution, while has been cut several times, is still a suspect. I would not recommend. if you in the market for emerging market debt exposure wrapped in a closed-end-fund structure, the reasonable and more diversified offerings are those of PCI, a multi-strategy PIMICO fund with a chunk in emerging market debt, hedged against interest rate increase, and over-earning its distribution, and DSL of Doubleline, another multi-strat fixed income offering with more e.m.d. exposure. for a more pure play, there is a long-time steady eddy offering of AWF, which lived though and survived several market cycles.

good luck.

ron said:

Ted, in the mentioned article, I looked over the ideas by Waggoner, and I thought BWG looked reasonable and interesting until I saw it has been ROC this year but nav has held up well with a managed distribution. Any thoughts on this Ted? Thank you.