If you love high-yield income, you have to love our Shadow Funds — the name we give to our closed-end fund recommendations, asserts Steve Mauzy, editor of Dividend Confidential.
We’ve thrown the door wide open this month. All 15 of our open recommendations are rated “buy”. It has been two years since we rated all our open recommendations as a buy for new and existing investors.
Value is the upside to a down market. Our recommendations have sold off with the overall market. We’ve seen the share-price discount to net-asset value (NAV) rise — the spread between price and the underlying portfolio. More important, we’ve seen distribution yields rise. The value proposition is as good as it has been all year.
We’re not supposed to play favorites, but I will. The Reaves Utility Income Fund (UTG) is one of my favorite funds for conservative income investors. Reaves shares have sold off to the extreme. The share price today lifts the starting yield to 7.9%.
The popular Vanguard Utilities Income Fund (VPU) yields 2.7% for comparison. We have not seen the yield this high in the two years we have recommended Reaves shares.
I love Reaves’ distribution history. The distribution has trended only up over its 18-year history. What’s more, the distribution has been periodically enhanced with special distributions.
Market corrections are the best time to vet the landscape for new CEF opportunities. Discounts expand and value emerges. Market corrections offer the opportunity to capture an even higher yield. They offer the opportunity to realize outsized share-price appreciation.