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The Chase Is Better Than The Catch

|Includes:BPOP, BUI, CII, EOI, EOS, OFG Bancorp (OFG), QQQX

I have become bored with my usual relevant titles and have decided to make the title based on whatever random song is playing in my head. If you are not a Motorhead fan, then I can't help you.

It is amazing. The Woman and I went to my sister's wedding on Saturday. Woman and I have not been getting along over the last few months. Both of us observed how dysfunctional the other couples are during the event and now we're getting along better than we have in years!

Anywho. This is the time of the month where I have the money to buy into a couple of stocks/funds. I'm thinking about one preferred stock and one cef this time. This is Monday, so as always this is subject to change depending on valuation and price by this Friday.

So. For preferreds:

(NYSE:OFG) - the series A & B stocks both have yields @ or above 8%. Another Puerto Rican bank that's doing okay and has the bonus of having a positive pe and is paying a dividend. And the preferred is paying monthly.

(bpop) - Same as above except the common doesn't pay a dividend. Both BPOPO and BPOPP are at levels I'd be happy with buying. I own a bit of BPOPP that I bought under par, and am willing to buy more if the price stays under the callable level.

I have more than enough money in mreits(even if they aren't really a mreit) preferreds, so I'm not going to consider these in this writing.

I would be interested in a floating rate preferred, but I don't see any under par that meet my minimum current 8% yield criteria. If there is a decent market sell-off, then maybe in November...

Okay. On to CEFs. Since I tend to buy fixed income with preferreds, it doesn't make much sense to buy a similar class with a CEF, right? Right. So I'm going to try to look for ones that can do well in a rising rate environment whilst still paying out an 8% distribution. Here we go:

JLA - option cef - next distribution should be in Dec. so may hold off.

CII - same as above. Both of these currently are trading below their 52 week average discounts.

There are other Blackrock and Nuveen option funds that are similar to these that fall within my buying parameters and tend to pay distributions about the same time. Let's see what else I can come up with...

MCN - another option fund. Will probably have a distribution at the end of November, so a maybe. Looking at the NAV, it seems that this one has had lack-luster results compared to others and has a bit higher expense ratio.

EOS - one I've owned before. I believe the option coverage is about 50% so some upside and some downside protection. Monthly pay. Around it's 52 week average discount.

I should point out that a lot of these option funds I'm looking at have a return - of - capital component. That's okay with these type of funds as selling the calls counts as ROC and is also their main source of income. You have to look at the NAV over time to see if it's an accounting gimmick or actually return - of - principal. ROP is a very bad thing and should be avoided. Check the NAV on this one for a classic example of evil ROP:

vs. the NAV on EOS:

Both of these list the majority of the distributions as return - of - capital. But just by looking at the charts you can see which one has a sustainable distribution and which one will cut it (or go belly-up).


EOI - much like EOS. Have owned both. Market freak-outs might bring the price and discount down in range that might make it more attractive to me. Both fall within my current guidelines for buying, but are a good bit more expensive than last year.

BUI - another Blackrock fund that focuses on utilities and infrastructure. End of November distribution. What is interesting is that the market price is going down while the NAV is starting to creep up after the recent interest rate roller-coaster. I think this one might be one I end up buying even though it's fairly new - check out what happened to the NAV since the last year's panic. And look at what happened to the price. And now look at where the price has cratered and the NAV is going up over the last month or so.

I cannot say what I will buy into on Friday. I would like BUI and any of the Puerto Rican banks preferreds as my first picks. But I will update as circumstances change.

Update for 10/11:

Ended up with ofg-b and Bui.