CEFL Is Interesting Now With A 17.9% Dividend Yield



CEFL has a 17.9% yield on annualized monthly compounded basis.

The tax bill will have an impact on the business cycle. The two major macroeconomic impacts will be from a form of deficit stimulus and the further widening of inequality.

There are reasons to buy CEFL, but also reasons for caution.

Possible disruption to the healthcare and housing markets and municipal finances resulting from the new tax bill could make the Federal Reserve less likely to raise rates.

The new tax bill should increase demand for financial assets.

Outlook For CEFL, Reasons to Buy and Reasons For Caution

The closed-end funds that comprise the index, upon which the UBS ETRACS Monthly Pay 2x Leveraged Closed-End Fund ETN (CEFL) is based, own diversified portfolios of stocks and mostly corporate bonds focused on higher yields. There is considerable variation in the types of issues held by the closed-end funds. The market prices of the high yielding securities depend on the overall supply and demand for financial assets. Macroeconomic variables influence the supply and demand for financial assets, as does government policy.

The new tax bill should increase demand for financial assets. The supply of financial assets, especially corporate bonds should decline. The tax benefits that accrue to corporations from debt will be reduced as the marginal tax rate declines from 35% to 21%. This will cause corporations to reduce their issuance of debt, so as to minimize their weighted average cost of capital. If a corporation now has a capital structure that it believes minimizes its weighted cost of capital, a lower marginal corporate tax rate should cause it to reduce the weight of debt in its capital structure. Additionally, increases in after-tax earnings resulting from lower taxes will provide funds for corporations to pay down debt. Immediate tax expensing of capital expenditures will also reduce the need for external financing to pay for new plant and equipment.

To the extent that securities prices initially rise as a result of the tax bill, CEFL would be an aggressive way to benefit, as it is 2X leveraged. There is an unleveraged ETF that is based on the same index, the YieldShares High Income ETF (YYY) for those that might want to benefit from a rising market in higher yielding securities but are more risk-averse.

My interest in CEFL is mainly as a way to diversify the risk entailed by holding a portfolio of high yielding 2X leveraged ETNs, that are based on indices of mortgage REITs, called mREITs, that have significant interest rate risk. However, those seeking very high current yields, while avoiding some of the interest rate risk associated with the mREITs, might want to consider CEFL as a stand-alone investment.

CEFL is one of the few instruments that provide a very high yield and some ability to benefit from a rising stock market. However, some of the factors that made me bullish previously are not as pronounced as before. Both of the classic economic risks relating to possible Federal Reserve action would be negative for CEFL. The yield on CEFL is not as high as it has been, and thus, is not now as attractive relative to junk bonds or some other high-yield 2X leveraged ETNs. Additionally, closed-end funds typically trade at either discounts or premiums to book value. On balance, there is a bias towards discounts. Because of significant changes in the composition of the index, comparisons of aggregate discounts to book value from previous years may not be very meaningful. Using data available as of December 22, 2017, the average discount to book value of the 30 high dividend closed-end funds that comprise the index upon which CEFL and its unleveraged version YYY is based was 7.06%. This is less than the 7.46% on November 2, 2017. It is near the lower end of its range, and that suggests caution. As of January 27, 2017, it was 9.28%. As of December 28, 2016, before the rebalancing, it was 9.5%. It was 6.9% on July 28, 2016. This compares to the record 13.8% discount to book value for CEFL on September 18, 2015. Much of the price increase in CEFL since then has been due to the reduction on the discount to book value that the components were trading at.

One reason for caution, at times, has been that some of the dividends paid by the components of CEFL include return of capital. Because of significant changes in the composition of the index, comparisons of the shares of dividends from return of capital to previous levels may not be very meaningful. Data available as of December 22, 2017, indicated that only 6.5% of the CEFL dividend consisted of return of capital. My calculation using available data as of December 28, 2016, before the rebalancing indicated that 17% of the CEFL dividend consisted of return of capital. It had been even higher in previous months.

While each of the closed-end funds that comprise the index upon which CEFL is based have their own specific risk factors, the outlook for CEFL generally depends on movements in the equity and fixed income markets. The new tax bill will have an impact on the business cycle, which can impact both the stock and bond markets. The two major macroeconomic impacts will be: 1. from a form of classic Keynesian deficit stimulus and 2. the further widening of inequality. Prior to enactment of the bill, the top 1% paid about 39% of Federal taxes. If a tax bill had been enacted that provided that 39% of the benefits went to the top 1%, there would have been very little impact on the degree of inequality. However, the actual tax bill provides that 83% of the benefits will go to the top 1%, while only 17% will go to the rest of the 99%.

Conventional analysis of the impact of tax legislation on inequality makes a profound error. Many use the terms pretax inequality and after-tax inequality. This terminology misses the causal relationship. A hundred years ago, looking at pretax inequality and then estimating how much the tax code impacts inequality might have been logical. That assumes there are some significant non-tax factors that are causing inequality, and tax law can then increase or decrease the degree of inequality. There is at any given point in time a degree of pretax inequality. However, almost all of the variability of pretax inequality since at least World War I has been a function of the cumulative effect of tax and other legislation. Thus, tax policy is the only significant cause for changes in the levels of inequality today.

One does not have to be a Keynesian to see that shifts in income to those with lower marginal propensities to consume will cause an increase in savings and a relative decline in consumer spending. The wealthy clearly have lower marginal propensities to consume. As I explained in a Seeking Alpha article "A Depression With Benefits: The Macro Case For mREITs":

...Shifting income to the rich by taxing dividends, capital gains, inheritances and corporate profits much less than the tax rates on wages also tends to make more funds available for investment since when the investment is taxed relatively less, more funds are made available for the investment. That would also put downward pressure on interest rates.

The primary change that has fundamentally changed the economy can be best described by Warren Buffett, CEO of Berkshire Hathaway (NYSE:BRK.A) (NYSE: BRK.B), who said, "Through the tax code, there has been class warfare waged, and my class has won," to Business Wire CEO Cathy Baron Tamraz at a luncheon in honor of the company's 50th anniversary. "It's been a rout."

The forces driving inequality through the class warfare that Warren Buffett points to are cumulative. It is the compounding effect of shift away from taxes on capital income such as dividends, capital gains and inheritances each year as the rich get proverbially richer which is the prime generator of inequality...

The shift of wealth from the middle class to the very wealthy has profound impacts on the economy and securities markets. It creates a cycle where initially the wealthy pour significant amounts into investments they perceive to be safe. This can first cause an increase in economic activity. In 2005 many considered mortgage-backed securities with adjustable interest rates to be essentially risk-free. This was especially true for those rated AAA by Moody's and S&P. This resulted in overinvestment in the real estate sector. The middle class eventually could not service the mortgage debt on their homes nor could they buy enough goods at shopping centers and department stores to generate enough funds to prevent many residential and commercial mortgages from defaulting.

We have seen this story before. It is not just a coincidence that tax cuts for the rich have preceded both the 1929 depression and the 2007 financial crisis. The Revenue acts of 1926 and 1928 worked exactly as the Republican Congresses that pushed them through promised. The dramatic reductions in taxes on the upper income brackets and estates of the wealthy did indeed result in increases in savings and investment. However, overinvestment (by 1929, there were over 600 automobile manufacturing companies in America) caused the depression that made the rich, and most everyone else, ultimately much poorer.

As I said in: MORL's Yield Climbs To 23.2% As A Result Of The Highest Monthly Dividend In More Than 2 Years

...The quandary for investors can be described as someone who has seen the first and last page of a book, but does not know either how long the book is or what happened between the first and last pages. We know that a massive transfer to the rich will happen. We know that the middle class has a much higher marginal propensity to consume than the rich. We know that initially the rich, or if you rather the job creators, use their additional after-tax income to invest. This extra investment initially boosts securities prices. The higher prices securities for securities enables investments to occur, that might have otherwise been undertaken. These can range from factories, shopping centers and housing. What we don't know is the path that equity prices and interest rates will take between the enactment of the tax shift and the eventual financial crisis or other event occurs, at which time the massive excess of supply of loanable funds as compared to demand for loans will push risk-free short-term interest rates down to near the lower bound, as was the case during the 1930s, in Japan for decades and in America since 2008.

The length, path and magnitude of a tax-shift induced cycle is particularly important to investors in leveraged instruments, such as high yield 2X leveraged ETNs. No two overinvestment cycles are identical. This time the picture is cloudier since most of the shift in the tax burden from the wealthy to the middle class will be via reductions in business taxes. However, that does not mean that changing corporate taxes other than the rate cannot impact economic activity. Reducing taxes on corporations would not increase economic activity since a profit maximizing corporation will make decisions that relating to the level of production, wages and prices that maximize after-tax profit. Since corporate income taxes are a percent of pre-tax profits, the level of output, wages and prices that maximize pre-tax profits are also the same levels that maximize after-tax profits. This was explained in: Get 16.8% Dividend Yield, And Diversify Some ETN Interest Risk.

Allowing immediate expensing of capital expenditures could bring forward capital expenditures that would have otherwise taken place in the future. This can be particularly powerful as the immediate expensing or extra accelerated depreciation was set to only last for a specified period. Allowing immediate expensing of capital expenditures could even cause projects that would otherwise be not accepted on a net-present value analysis be undertaken as a result of now having expected internal rates of return exceeding the hurdle rate.

There is also a "geographical Laffer Curve effect" when different taxing jurisdictions cause activity to shift from higher tax jurisdictions to those with lower taxes. Generally, this is more pronounced the closer the different jurisdictions are. People driving from New York to New Jersey to pay less sales taxes when they shop are an example. Lower corporate taxes in the U.S. could shift some activity from other countries. Although, other countries could in turn lower their corporate tax rates, in return. Allowing repatriation of corporate profits now nominally held in other countries or just eliminating taxes on foreign earnings could boost the value of shares in multinational corporations. Most major profitable multinationals have ample access to capital regardless of where their cash is located. Thus, very few multinational corporations are not undertaking any projects because of where their cash is located.

This time we may have a much shorter overinvestment period and might go almost directly to the financial crisis period. This could occur if disruptions to specific sectors precipitate a financial crisis. Eliminating the Obamacare individual mandate will cause there to be 13 million less people with health insurance. Uninsured people spend less on health care than those with insurance. Most studies indicate a 25% difference. Thus, fewer insured people will result in less spending on health care than would have been the case otherwise. Other than the direct impact on GDP from lower expenditures, there could be financial distress as some firms in the health care become unable to pay their debts...

There is now a significant possibility that disruptions to specific sectors in the economy could be more important than the pure macroeconomic impacts of the Republican tax bill. The risks of defaults stemming from weakness in the housing-related sectors probably exceeds that of healthcare. The homebuilders were correct in their complaints that most of the tax advantages of home ownership will be eliminated by the Republican tax bill. As the homebuilders pointed out, many more middle and low-income people will no longer itemize since the standard deduction has increased and other deductions will be reduced or eliminated. Additionally, the lower $750,000 limit on mortgage interest deduction for new home purchases reduces tax advantages of home ownership.

Thus, as the homebuilders have argued, only a few relatively wealthy households that still itemize will get any benefit from the $10,000 deduction. For those wealthy households, a $10,000 deduction is not likely to be a major factor when deciding whether to buy a home. The net result could be a significant negative impact on home prices.

Another potential disruption from the Republican tax bill also stems from the limit on deductions for state and local taxes. As with the real estate impact, the impacts on the finances state and local will vary widely for different regions and locations. There are some jurisdictions that will be severely impacted the reduction or eliminations of deductions for state and local taxes. New York and California are the obvious examples.

Disruption caused by the Republican tax bill could result in various degrees of financial distress and defaults that could cause the Federal Reserve set short-term interest rates lower that what markets are now assuming. This would be beneficial for the fixed income markets. The equity market could also initially benefit from the increased inequality, as the growing pool of savings seeks securities to invest in. We do not know how much is already in the market. In a longer run, the excess of savings could enable new businesses to start that otherwise might not have been able to obtain financing. These new businesses could create additional competition for existing companies which could eventually reduce profit margins and stock prices. To the extent that small business and potential entrepreneurs are now stifled by over-regulation and red tape, a Trump administration that reduces those impediments to new start-ups could also eventually curtail profits for existing firms.

The classic risks that investors have faced since the end of World War II have been more or less related to the Federal Reserve. One risk has been that of an inverted yield curve. Every inverted yield curve has resulted in a period of economic weakness. In hindsight, many claim that by raising short-term interest rates high enough to cause an inverted yield curve, the Federal Reserve erred, since that was the cause of the subsequent recession. A recession would be bad for the equity markets relative to the bond markets.

The other classic risk is that which occurs when the Federal Reserve acts to punish what it perceives as bad government policy, by raising rates. From the late 1970s until, arguably 2007, the Federal Reserve at times, used monetary policy to dissuade politicians from what the Federal Reserve considers profligate fiscal policy. The term "bond market vigilantes" referred to financial market participants who voted with their money against the inflationary impacts of government policy. However, it was the Federal Reserve that took on the major role of punishing politicians when it considered fiscal policy too inflationary.

The present composition of the Federal Reserve Open Market Committee is probably disinclined to engage in any punishment unless there is actually significantly above target inflation, and it is clear that such inflation can be directly attributed to actions of politicians. There also may be some shift away from the perception that higher interest rates are both inevitable and desirable among some policy makers and market participants. Some Federal Reserve officials have insinuated that the current target rate for federal funds is not that far from where it will ultimately be under normal neutral conditions.

An extremely pessimistic opinion of the fixed income market would be that rapid wage growth will result in a spike in inflation, which could force the Federal Reserve to raise interest rates precipitously. This would reduce the value of the bonds and preferred stock held in the closed-end funds that comprise the index upon which CEFL is based. While it has not received much attention recently, protectionism is still a threat to the financial markets, particularly the stock market. If one was an extreme optimist in terms of the stock market, they might hold out hope that the trade deficit bluster and threats of protectionism that at times emanate from the Trump administration might just be the cause of crisis that enables the USA to replace much or all of the income tax with a value added tax. The tremendous benefits of doing so are discussed in: Value Added Tax: A Way Out Of The Trade War Train Wreck?

Analysis of the January 2018 CEFL Dividend Projection

As I indicated in CEFL Still Attractive With 16% Dividend Yield, Despite Coming February Dividend Shock, there has been a significant change in the composition of the index as a result of the rebalancing that occurred in the beginning of 2017. On balance, the dividend yield on the closed-end funds that comprise the index is somewhat lower than prior to the rebalancing. There will be another rebalancing in the beginning of 2018. However, the January 2018 CEFL dividend will be based on the index as it was constituted in December 2017. While typically called dividends, the monthly payments from 2X leveraged ETNs such as CEFL are technically distributions of interest payments on the ETN note based on the dividends paid by the underlying closed-end funds, pursuant to the terms of the indenture.

Since 27 of the 30 high dividend closed-end funds that comprise the index upon which CEFL and YYY are based pay monthly dividends, there is a minor seasonal factor involved with the CEFL dividend. In some months, some of the quarterly payers have ex-dividend dates and that boosts the next months' dividends. Only the Morgan Stanley Emerging Markets Domestic Debt Fund (EDD), Templeton Emerging Markets Income Fund (TEI) and Liberty All-Star Equity Fund (USA) now pay quarterly dividends. USA increased its quarterly dividend to $0.17 from the prior $0.13. However, that will not impact the January 2018 CEFL monthly dividend, since it has an ex-date in November 2017 thus it will not contribute to the January 2018 CEFL monthly dividend. All of the other components will contribute to the January 2018 CEFL monthly dividend.

The table below shows the components of CEFL along with the price, weight, ex-dividend date, ratio of price to net asset value, dividends and contributions to each. In the frequency column, "q" denotes quarterly, and those that pay monthly have an "m". From this data, I calculated a projection for the January 2018 monthly dividend CEFL of $0.2845. Most, but not all, of the Business Development Companies that comprise the index upon which BDCL and BDCS is based, maintained the same level of dividends as in the previous quarter.

There were some factors and changes that will impact the January 2018 dividend relative to the previous CEFL monthly dividend. The John Hancock T/a Dvd Income Fund (HTD) will distribute $0.6645. This will consist of a long-term capital gain distribution of $0.55470 and a return of capital of $0.0551, in addition to the dividend. This will increase the January 2018 dividend. The previous distribution was $0.13. TEI declared a long-term capital gain distribution of 0.010998 which will increase its quarterly dividend to $0.2953. The previous quarterly distribution was $0. 119.

Performance of CEFL

For the one-year period ending December 22, 2017, the CEFL returned 26.16% based on a purchase on December 22, 2016, at the closing price of $16.48, the December 22, 2017, price of $18.00 and the reinvestment of dividends through to December 2017. It does not include my projected January 2018 monthly dividend of $0.2945. This exceeds the total return on the S&P 500 (SPY) of 21% over the same period, also with reinvestment of dividends. Since the price of CEFL is only modestly higher than it was a year ago, it was mainly the high dividends that generated the 26.16% return. The substantial 65.17% total return performance of CEFL over the last two years ending on December 22, 2017, is also due primarily to the high dividends. This is almost twice the 36.89% total return on SPY over the same period also with reinvestment of dividends.

Leveraged High-Yield ETNs and the Rationale for Holding All of Them

Many thought that the 2016 election results would usher in a period of higher interest rates. Rates have risen somewhat since the election. However, 2x Leveraged ETNs that I follow have done very well since the election. Those are in addition to CEFL, the UBS ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (MORL) and the UBS ETRACS 2xLeveraged Long Wells Fargo Business Development Company ETN (BDCL).

As I explained in the article 30% Yielding MORL, MORT And The mREITs: A Real World Application And Test Of Modern Portfolio Theory, a security or a portfolio of securities is more efficient than another asset if it has a higher expected return than the other asset but no more risk, or has the same expected return but less risk.

I was originally drawn to 2x leveraged high-yield ETNs as a vehicle to take advantage of my macroeconomic outlook that interest rates would stay much lower for much longer than many market participants believed. MORL was the first one I considered since low interest rates would benefit the leveraged mREITs that comprise the index upon which MORL is based as well as amplifying MORL's dividend via the 2X leverage. In A Depression With Benefits: The Macro Case For mREITs, I explained my view that interest rates were not likely to rise in the intermediate future and the mREITs were a good way to benefit, if my outlook proved correct. Furthermore, MORL would provide a very high yield, in excess of 20%, because of its 2X leverage which involved implicitly borrowing at the three-month LIBOR rate. This would generate a large positive carry.

After UBS came out with CEFL, a 2x leveraged high-yield closed-end fund ETN, I pointed out in 17.8%-Yielding CEFL - Diversification On Top Of Diversification, Or Fees On Top Of Fees? that those investors who have significant portions of their portfolios in mREITs and in particular a leveraged baskets of mREITs such as MORL could particularly benefit from diversifying into an instrument that was correlated to the S&P 500, as mREITs were not very correlated to SPY.

In my article, BDCL: The Third Leg Of The High-Yielding Leveraged ETN Stool, I said that BDCL is highly correlated to the overall market, but may be a very good diversifier for investors seeking high income who are now heavily invested in interest rate sensitive instruments. All leveraged ETNs have interest rate risk since their dividends fluctuate inversely with the borrowing costs implicit in their leveraged structure. However, MORL has much greater exposure to interest rates than CEFL, and CEFL has more interest rate risk than BDCL. In the continuum from mostly interest rate risk to mostly equity market risk, MORL is the most interest rate sensitive, and BDCL is the most equity market sensitive. CEFL is between the two and has some interest rate risk and some equity market risk.

The reason for the difference in relative sensitivity to interest rate and equity market risk amount in the three 2x leveraged high-yield ETNs is due to the composition of the indexes upon which they are based. MORL is based on an index of mREITs. Interest rates impact mREITs in two ways. Higher long-term rates are a two-edged sword for leveraged mREITs like Annaly Capital Management, Inc. (NLY). Higher long-term rates reduce the value of their mortgage portfolio and thus the book value of the shares. The other side of the two-edged sword is that higher long-term rates and lower prices of mortgage securities provide an opportunity for mREITs to reinvest the monthly principal payments they receive in higher yielding mortgage securities. A highly leveraged mREIT with, say, 9 to 1 leverage and CPR of 11% would be generating new cash available for reinvestment from prepayments of principal each year approximately equal to the entire equity of the mREIT.

CEFL is based on an index of higher-yielding closed-end exchange-traded funds. Some of the closed-end exchange-traded funds contain common stocks, usually the high dividend paying variety. Many of the closed-end funds in the index that CEFL is based on contain high-yield bonds. These junk bonds are considered to have some equity-like characteristics. However, to the extent that those bonds are longer-term obligations with fixed coupon rates, they are impacted by declines in the overall bond market like that which has occurred since the election. In contrast, it is highly unlikely that any of the business development companies that comprise the index upon which BDCL is based would hold any longer-term obligations with fixed coupon rates. The only debt securities that business development companies would normally hold in the course of their business would be loans to the companies that the business development companies have invested in. Those debt instruments would usually be convertible into equity and have adjustable interest rates. Thus, they would tend not to be hurt by higher interest rates.

Since CEFL yields not that much less than MORL, this suggests that a portfolio consisting of both MORL and CEFL would have close to the yield of a portfolio with only MORL but considerably less risk. My article explained why adding BDCL to such a portfolio could result in a more efficient risk/return profile. The post-election performance of three UBS ETRACS Monthly Pay 2xLeveraged ETNs, MORL, CEFL and BDCL, illustrates the advantages of diversification. All three have very high yields. However, a portfolio consisting of all three would have almost as much yield as a portfolio consisting only of any single one but considerably less risk.

Conclusions and Recommendations

I am still cautiously bullish on CEFL despite the price increases over the past year. CEFL is one of the few instruments that provide a very high yield and some ability to benefit from a rising stock market. However, some of the factors that made me bullish previously are not as pronounced as before.

The uncertainty of possible impacts from the new tax bill suggests large fat-tail risks in both directions in the equity market. This would lead investors, who have a significant portion of their portfolios in CEFL, to consider adding MORL to hedge against the risk of much weaker economic growth and BDCL to get the potential gain from much stronger economic growth. This would enable them to maintain the income in the high teens that CEFL now delivers. Likewise, MORL investors might want to consider adding CEFL or BDCL in order to hedge the against a high real growth scenario.

When choosing between CEFL, BDCL, and MORL. There are a number of considerations. Even though the average discount to book value for the closed-end funds in the index upon which CEFL is based on has declined from earlier extreme levels, it still is significant. As I discussed in MORL's 19.9% Dividend Yield Has Produced Triple Digit Total Returns, But New Risks Have Arisen, the average discount to book value for the mREITs in the index upon which MORL is based on has recently declined so much that it has now disappeared and has turned into a premium. Thus, in terms of relative value as measured by average discount to book value for the components in the index, CEFL looks better than MORL. The discounts to book value are not available on a timely basis for BDCL.

The yields on all of the high-yielding 2x leveraged ETNs like CEFL are still compelling. However, the uncertainty regarding economic variables means that significant event risks exist in addition to the risks inherent with the ETNs use of leverage. This is in addition to the leverage employed by many of the components that make up the indices upon which these ETNs are based. I am diversifying the large proportion of MORL in my portfolio with some CEFL and BDCL since there is a small possibility of much stronger economic growth than I expect. That enacting the new tax bill will, at minimum, create a greater perception on the part of many market participants of much stronger economic growth should be considered by shorter-term investors. If something catastrophic were to occur, it would be expected that the stock market would decline sharply, but MORL could do better as investors seek the safety of agency mortgage-backed securities and the Federal Reserve lowers interest rates.

There is also a specific risk relating to CEFL in that a once per year rebalancing will occur at the beginning of 2018. Previously, there was some concern that the rebalancing could lead to front-running arbitrage opportunities which could negatively impact holders of CEFL. Changes in the timing of the rebalancing procedure were put in place by those who manage the index upon which CEFL is based which should eliminate front-running arbitrage opportunities. However, there is an inherent uncertainty that results from the possibility of significant changes in the composition of the index upon which CEFL is based.

In view of the uncertainty and risks. Active traders might consider waiting until discounts to book value for CEFL components return to more attractive levels or wait until the impact of the tax bill become more clear. However, a lesson we can learn from the last few years is that waiting for price declines in high-yielding instruments like CEFL can backfire, as the large dividends forgone by waiting exceeds the savings from a lower purchase price.

My calculation projects a January 2018 CEFL dividend of $0.2945. The implied annualized dividends based on the last three months would be $2.9807. This is a 16.6% simple annualized yield with CEFL priced at $18. On a monthly compounded annualized basis, it is 17.9%. With a yield around 18%, without any reinvestment of dividends, you get back your initial investment in about six years and still have your original investment shares intact. If someone thought that over the next five years, equity markets and interest rates would remain relatively stable, and thus CEFL would continue to yield 17.9% on a compounded basis, the return on a strategy of reinvesting all dividends would be enormous. An investment of $100,000 would be worth $227,577 in five years. More interestingly, for those investing for future income, the income from the initial $100,000 would increase from the $17,900 initial annual rate to $40,682 annually.

CEFL Components prices as of December 22, 2017











Eaton Vance T/a Gl Dvd Incm










Alpine Total Dynamic Dividend










Liberty All Star Equity Fund









Calamos Strat Tot Return Fd










PIMCO Dynamic Credit Income Fund










Blackrock Multi-Sector Income










Calamos Convertible Opp&inc










Morgan Stanley Emerging Markets Domestic Debt Fund










Doubleline Income Solutions










Backstone /GSO Strategic Credit Fund










First Trust Intermediate Duration Prf.& Income Fd










Blackrock Corporate High Yield Fund










Wells Fargo Advantage Income Opportunities Fund










BlackRock Credit Allocation Income Trust










Prudential Global Short Duration High Yield Fund










Cohen & Steers Quality Income Realty Fund Inc










John Hancock T/a Dvd Income










Eaton Vance Limited Duration Income Fund










Wells Fargo Advantage Multi Sector Income Fund










Western Asset High Income Fund II










AllianceBernstein Global High Income Fund Inc










Templeton Emerg Mkts Inc Fd










Prudential Short Duration High Yield Fd










Nuveen Pfd Sec Income Fd










Western Asset High Income Op










First Trust High Income Long/short Fund










Nuveen Preferred Income Opportunities Fund










Nuveen Credit Strategies Income Fund










Allianzgi Convertible & Income Fund










Blackrock Debt Strategies Fund Inc










Disclosure: I am/we are long CEFL, MORL, BDCL.

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.

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