Invesco Van Kampen Select Sector Municipal Trust (NYSEMKT:VKL) invests substantially in investment-grade municipal securities. It may invest up to 20% in municipal securities rated B or BB. It allocates assets primarily among the transportation, housing, healthcare and utilities sectors of the municipal securities market.
VKL pays a monthly dividend of 0.073 and is yielding 7.2%. This CEF has increased its undistributed net investment income (UNII) from $0.02 per share on Jan 2009 to $0.21 per share as of August 31st, 2011.
Over the past year, the VKL share price has increased from $11.86 to $12.26. Over this time, the fund has also distributed $0.89 to shareholders. Conversely, the S&P 500 ETF (NYSEARCA:SPY), has decreased from $118.80 to $116.56 per share while distributing only $2.32 to shareholders. Over the past year, VKL is up approximately 10.6% (capital gains plus dividends) compared +0.1% for the S&P (capital gains + dividends).
What makes VKL an attractive position for an investor's portfolio, however, is its minimal correlation with the S&P 500. A correlation coefficient value ranges from -1 to 1, inclusive, where a value of 1 indicates perfect correlation and a value of -1 indicates perfect anti-correlation (e.g. if S&P is up, stock is down). When the correlation coefficient between VKL and the S&P 500 is calculated using daily stock price data over the previous year, a value of 0.06 is returned which indicates minimal correlation. To put this number in perspective, many of the other closed-end funds I own in my portfolio feature correlations between 0.4, and 0.6 with the S&P 500.
Thus, initiating a position in VKL provides an investor with exposure to returns which are not correlated to the broader market. Such an attribute may be highly desirable given the market's poor performance over the past few months and the overall market picture looking forward.
Disclosure: I am long VKL.