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High Premium Municipal Closed End Funds

Jun. 29, 2014 7:28 AM ETMHI, MAV, NMZ3 Comments
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I have enjoyed investing in two municipal closed end funds--MAV and MHI for years. These two have consistently paid the highest (or close to it) monthly distributions. Distributions are free of federal taxes. The two have also sold at a high premium compared to others in the group, but now these are selling are record premiums.

52 wk premium Current Distribution Earnings
MHI 2% to 16% $0.095 (7.33%) $0.0905 (as of 10/31/13)
MAV 5% to 26% $0.095 (7.27%) $0.0878 (as of 3/31/14)

Source: cefconnect.com

Are the premiums justified? In my opinion no. Earnings per share are running below distributions, although UNII is very healthy for both. And something that really bothers me is MHI has not released its annual report (April 2014), so we really do not know the recent earnings and UNII figures.

I have sold all MAVs and most of MHIs, and switched some money to NMZ, which updates its earnings and UNII every month.

Update: MHI released the annual report. Earnings per share is 0.0833 and UNII is 0.2941 as of April 30, 2014.

Disclosure: The author is long MHI, NMZ.

Additional disclosure: Sold all of MAVSold most of MHI

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