Closed-end funds that pays out a reliable stream of income can help in the planning for retirement, explains Rida Morwa; in this special 5-part report, the editor High Dividend Opportunities highlights his favorite ideas for retirees and other income investors.

BNY Mellon Municipal Bond Infrastructure Fund (DMB) is a CEF that invests in municipal bonds. With prices beaten down by inflation and rate hike fears, now is the time to buy municipal bonds.

While both inflation and interest rate hikes represent real headwinds for municipal bonds, the market has done what it can always be counted on doing. It has over-reacted to an extent that has made municipal bond funds a good value. As income investors, now is the time to pick up a safe stream of income at a good price.

Municipal bonds are very defensive investments. Governments have a somewhat captive audience in the residents of their jurisdiction so they have a much easier time increasing taxes than a regular business would in raising prices.

This is true even during a recession, and why investors rush into municipal bonds when economic times get hard. This produces both good cash flow and price increases during recessions. Exactly what we want as income investors looking to get a jump on the hard times that might be coming.

DMB had paid out a monthly dividend of 5.3 cents per share since 2016. That produces a current yield of 5%. While municipal bonds tend to have lower yields than similarly rated corporate bonds, municipals are Federal Tax Exempt. Typically, the distribution from DMB is 100% federal tax-free.

Depending on an investor's highest marginal rate this will correspond to a much higher rate on a fully taxable bond. If one's highest marginal rate is 22%, DMB's rate after taxes will be equivalent to a fully taxable bond paying 6.19%. Even at the 15% rate, DMB is still as good as 5.68% from a taxable bond.

Bridges, roads, utilities, and other infrastructure make up over 32% of the DMB's assets. Funding such infrastructure is a basic function of government with a long history of successfully repaying bonds in full. Healthcare, over 20% of the portfolio holdings, is another area where municipal governments have a good history of repaying debt.

Right now, the fear of the impact of higher interest rates and inflation is having an outsized impact on the price of municipal bonds and funds like DMB that invest in them. This makes for a very good opportunity to pick up a fairly safe investment with a high yield.

DMB has also produced better returns than an index of municipal bonds. So you get a good income from a manager with a good track record.

Whichever direction the Fed decides to go, I view the future of municipal bonds over the next years as very positive. This compelling opportunity comes with a favorable tax cherry on top, we aren't going to turn it down!

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