I would be adding or initiating a position here in the Nuveen Tax-Advantaged Dividend Growth fund (NYSE:JTD), $14.03 market price, $15.77 NAV, -11.0% discount, 8.8% current market yield.
JTD has come down hard the last couple days after going ex-dividend, along with all of the Nuveen CEFs, just this past Monday. I believe this is highly unwarranted as JTD has had one of the best NAV performances of any diversified equity based CEF this year, up 4.6% YTD vs. the S&P 500, up 2.7% (as of 6/13/16). Most equity CEFs that use either leverage or option-income aren't even close to that level of performance this year. Only CEFs that are sector focused in utilities and commodities like gold and oil have beaten JTD so far this year. And unlike many sector focused CEFs, JTD has been a strong performer ever since it went public in June of 2007, not long before the financial crisis.
JTD is a 30% leveraged CEF with roughly 75% of its portfolio invested in large cap US dividend paying stocks and roughly 25% invested in preferred securities. JTD also sells index options for added income potential. So at a -11% discount currently, based on a real time $14.03 market price, JTD has a very reasonable 7.8% NAV yield but because of its market price discount, investors can realize an 8.8% current market yield.
With that use of leverage and options, JTD has a lot of moving parts and that comes at a cost with a total expense ratio of 1.4% based on the total managed assets of the fund. But I believe that is a relatively modest expense to absorb when you consider that 0.34% of that total is due simply to interest charged on leverage, which is more than offset by the high yield and appreciation potential that leverage brings.
When there are many CEFs trading at only slight discounts to up to 100% market price premiums with NAVs that are still down on the year, I believe JTD is a steal here around $14.
For more information on JTD, including top holdings and top sectors, go to this link, JTD Holdings & Detail
Disclosure: I am/we are long JTD.