Joe Eqcome

Four Tax Free Income Stocks

Stockbloger

While there are still good reasons to own CEF muni funds (higher proposed tax rates and still historically attractive spreads between muni and government yields) this sector has already been one of the best performing CEF sectors YTD. That's not to imply they don't have further to go.

Of the 237 muni bond funds in my data base, Muni CEFs’ share prices are up 25%, thus far exceeding the change in respective NAVs by as much as 10%. (So, investors seem to be favorable disposed to this sector.) The average unweighted distribution yield for both national and state muni CEF sectors is 6.2%. They’re trading at an average discount of 6.7% with an average expense ratio of 1.4%.

Regarding your specific observations, I think VPV is probably the most attractive. It’s selling at a reasonable yield 6.8% and at an 11.1% discount with an average expense ratio. Both MAV and VCV are selling at or above par.

VMV is the one you mentioned on which I would need to do some further homework. It’s very small ($47 million in Assets), it’s leveraged with ARPS at 42%, and its expense ratio is 100 basis points above the average.

One of my favorites in this sector, that I’d be interested in your thoughts, is Nuveen Insured Premium Income Municipal Fund 2 NPX. Its portfolio is 44.3% “AAA” rated and 42.2% “AA” rated. It yield is 6.2%, selling at a 9.1% discount with an expense ratio of 1.28%. While it employs leverage, it has no outstanding ARPS.

It’s just food for thought.

Joe Eqcome (Long NPX)