Putnam Municipal Opportunities Trust (PMO) is a closed-end fund that is five-star-rated by Morningstar; it's objective is to seek a high level of current income exempt from federal income tax, suggests Marty Fridson, editor of Fridson/Forbes Income Securities Investor.

The fund invests in predominantly investment grade municipal securities issued by states, municipalities, and market sectors, consistent with the preservation of capital. As of 05/31/22, sector weightings largely consisted of Health Care (18.65%), Transportation (14.82%), State Debt (11.45%), Local Debt (9.82%), and Education (9.80%).

More than 85% of the portfolio was rated Baa3 and BBB- or higher by Moody’s and S&P, respectively, with 60% of total issues rated A to AA. The fund’s top ten holdings as of 05/31/22 accounted for just 13.11% of the portfolio. Issue-specific names were well dispersed, with no large exposures.

PMO’s distributions may be composed of ordinary and/or tax-exempt income, net capital gains, and/or a return of capital, consistent with the policy of providing a $0.0531 monthly distribution.

Distributions were exempt from federal income tax or full-year 2021 and continue to be so in 2022. Historical market price total return performance has been solid, measuring 9.76% for full-year 2021.

However, in 2022 total return has been negatively affected by inflationary pressures and sharply higher interest rates. As a result, PMO reported a market price total return for the YTD period ended 03/31/22 of -18.38%.

We expect much improved performance over the second half of 2022. PMO is suitable for low- to medium-risk taxable portfolios. Buy at $13.75 or lower for a 4.63% annualized yield.

Subscribe to Fridson/Forbes Income Securities Investor here…