Market value: $1.5 billion
Distribution rate: 7.4%*
Expenses: 1.32%
Closed-end funds are a nice fishing pond for investors hunting for monthly dividends.
If you’re unfamiliar with the asset class, closed-end funds (CEFs) are mutual-fund-like products, but they trade on the New York Stock Exchange like stocks. However, they shouldn’t be confused with ETFs like PGX or AGG. CEFs are a very different animal.
ETFs generally track an index benchmark and will always trade at or very close to net asset value. That’s because, when prices occasionally deviate, institutional investors can force the price back into line by creating or destroying shares.
CEFs don’t allow for that. Their share count tends to be fixed, so their prices often drift far from their net asset value. If you are patient and bide your time, you can often buy a dollar’s worth of quality stocks and bonds for 90 cents or even less.
This brings me to the Eaton Vance Limited Duration Income Fund (EVV, $13.06), which owns a portfolio of bank loans, asset-backed securities and other assorted bonds. Much of the fund’s portfolio is invested in floating-rate securities, which limits its sensitivity to interest rates. If I’m wrong about bond yields trading sideways and they instead go higher, EVV should escape mostly unscathed.
EVV trades at a fat 11.5% discount to its net asset value and yields an attractive 7.4% – a distribution that this CEF pays monthly.
SEE ALSO: 10 Funds That Can Beat the Market for Another Decade
*Distribution rate can be a combination of dividends, interest income, realized capital gains and return of capital, and is an annualized reflection of the most recent payout. Distribution rate is a standard measure for CEFs.
