Cohen & Steers Triple Play

08/01/2018 5:00 am EST

Focus: FUNDS

Robert Carlson

Editor, Retirement Watch

Bob Carlson, is a leading dividend expert and editor of Retirement Watch. In his model portfolio designed  for retirees seeking steady income, he currently holds three specialized closed-end funds from the Cohen & Steers fund family.

I recommend adding Cohen & Steers REIT & Preferred Income (RNP). This closed-end fund is split roughly equally between two sectors in which Cohen & Steers excels: REITs and preferred securities.

The advantages of the preferreds are that they offset some of the volatility of REITs and generate higher income. The fund has a leverage ratio of around 25% and sells at an 11.56% discount to net asset value. That’s around its long-term average but sharply higher than its discount in late 2017.

The fund is up 1.59% in the last month but still is down 4.63% for the year to date. It’s up 8.75% over three months. The distribution yield is 7.53%. Some years a portion of the distributions is a return of capital.

Another closed-end fund I’m recommending adding to the portfolios is Cohen & Steers Infrastructure (UTF). As the name implies, the fund invests in securities issued by infrastructure companies such as utilities, pipelines, toll roads, airports, railroads and more.

It seeks total return with high income as part of that return. It can invest in any type of security and holds bonds and preferred securities in addition to common stock. The fund also invests globally, but about 54% of the holdings are U.S.-based. It has a leverage ratio of around 30%.

The leading sectors in the fund recently were regulated electric utilities (16%), energy infrastructure corporations (12%), cell towers (11%), airports (8%) and integrated electric companies (8%).

The fund recently sold at a 4.86% discount to net asset value. The distribution yield is 7.78%, and it hasn’t made return of capital distributions for a couple of years.

I also recommend Cohen & Steers Limited Duration Preferred & Income (LDP), a closed-end fund that invests in preferred securities with limited durations. That reduces the risk of loss from higher interest rates.

The fund invests globally and isn’t tied to an index. That’s good, because preferred stock indexes have a lot of low quality securities. Also, a large portion of the fund’s distributed income is “qualified dividend income” under the tax code, qualifying for a lower income tax rate.

The fund has a leverage ratio of about 30%. The fund declined 0.88% in the last four weeks and is up 0.38% for the year to date. The recent distribution yield was 7.42%. Some years a small portion of the distributions is return of capital. It has a discount to net asset value of 1.91%.

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