Several high-yielding dividend producers in the municipal bond fund sector have recently increased their payouts by more than 30%, surprising investors. Leading fund manager Nuveen has been at the forefront of this trend, with its Nuveen AMT Free Quality Municipal Bond Fund (NEA) raising its payout by 37% to a yield of 7.7%. This has resulted in double-digit yields for investors in the top tax brackets.
Investors have been reaping the benefits of stability and high tax-free income from municipal bond CEFs like NEA, Nuveen Quality Municipal Revenue Fund (NAD), and Nuveen Municipal Loan Income Fund (NZF). These funds have provided solid returns since they were purchased, with overall performance being driven by dividends rather than just price appreciation.
Looking ahead, investors can expect further gains from municipal bond CEFs due to the discounts they are currently trading at relative to their net asset value (NAV). Additionally, the Federal Reserve’s likely rate cuts in response to economic slowdowns could further boost bond performance. As rates fall, bonds typically see an increase in value, providing a tailwind for bond CEFs.
Despite the recent bounce back in prices of these high-yield funds, investors may still have an opportunity to add to their positions when prices dip again. By waiting for the right moment, investors can potentially maximize their yield and overall returns from these municipal bond CEFs.
Overall, the recent increase in payouts from municipal bond CEFs like NEA, NAD, and NZF highlights the potential for strong income generation and stable returns in the current market environment. With favorable factors such as discounts to NAV and potential rate cuts from the Federal Reserve, these funds offer attractive opportunities for income-focused investors looking to build a diversified and high-yield portfolio.
Article Source
https://www.forbes.com/sites/brettowens/2024/06/26/forget-nvidia-these-boring-77-dividends-just-jumped-30/
