Bargains In Closed End Municipal Funds- Buy NVG And NZF Today

| About: Nuveen Dividend (NVG)


Nuveen has just completed two Muni CEF mergers. NPT,NMA and NXZ were merged into NZF, and NIO, NQI, and NQU were merged into NVG.

Nuveen just announced very large dividend increases for the two new funds, creating two of the highest yielding muni CEF's.

Because uninformed investors (and their brokers) who just received shares of NVG and NZF in the merger are dumping shares, an incredible bargain is being created.

Because NZF and NVG were renamed, the dividend increases are not being reported as increases, just as new dividends.

The action in closed end funds never ceases to amaze me. The two above mentioned mergers were just completed on April 11th, and I expected some selling of NVG and NZF because it is a natural occurrence in CEF mergers. It also gives brokers a reason to call clients and do some transactions! But the selling in NVG, and NZF this morning, while the rest of the Muni CEF's are still in rally mode is amazing.

What makes it more amazing, is that in a surprise (to me) announcement, Nuveen just raised the dividends of the two funds to levels I would not have imagined. Because the two funds have changed their name, and technically are "new" funds, the dividend increases are being reported as simply new dividends, and not dividend increases.

You have a combination of indiscriminate selling combined with super dividend increases which is creating bargains.

First the dividend increases: Nuveen increased the dividend of NVG from .0645 per share per month to .076. This is a 17.8% increase! Nuveen raised the dividend of NZF from .069 per share per month to .076. This is a 10.1% increase.

NVG and NZF are currently down over 1% in market trading on April 13th. Here is the current data.

Stock Price NAV Discount Dividend Yield
NVG 15.07 16.74 9.98% .076 6.05%
NZF 15.10 16.52 8.60% .076 6.04%
Click to enlarge

Compare these numbers with any of the other Nuveen Muni CEF's. Not only are these now two with the largest discounts, but NVG goes from being one of Nuveen's lowest yielding Muni CEFs to one of its highest! To see just what bargains these are, here are the numbers on some other popular Nuveen Muni CEF's:

Stock Price NAV* Discount Dividend Yield
NPM 14.96 15.95 6.21% .072 5.78%
NAD 15.10 16.02 5.74% .071 5.64%
NEA 14.50 15.46 6.21% .0625 5.17%
NPP 16.11 16.74 3.91% .0730 5.44%
NQM 15.98 16.48 3.03% .0775 5.82%
Click to enlarge

*adjusted for today's ex dividend

Needless to say, at these prices, I am buying large positions in NVG and NZF. Compared to the CEF Muni universe, they should be trading 20-30 cents higher than their current prices at the least

Disclosure: I am/we are long NVG AND NZF.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.