The search for value and yield in today’s market environment can be challenging, but closed-end funds (CEFs) can offer attractive opportunities for investors. With some CEFs trading at discounts between 10% and 15%, investors can potentially earn dividends as high as 14%. One such fund is the Gabelli Dividend & Income Trust (GDV), which boasts a distribution rate of 5.8% and a discount to NAV of 15%. Managed by legendary investor Mario Gabelli, GDV offers a straightforward equity-income portfolio with exposure to growth stocks like Microsoft, Nvidia, and Alphabet, delivering a nearly 6% yield on a monthly basis.
Another lucrative option is the Kayne Anderson Energy Infrastructure Fund (KYN), offering a distribution rate of 8.3% and a discount to NAV of 10.6%. KYN provides exposure to energy infrastructure stocks across North America, including midstream operators and utilities, with a portfolio of 40 tickers led by companies like MPLX LP, Energy Transfer LP, and Enterprise Products Partners LP. Despite its success in 2024, KYN is still trading at a discount, making it an attractive investment opportunity for income-seeking investors.
The MainStay CBRE Global Infrastructure Megatrends Term Fund (MEGI) offers a unique investment opportunity focused on global infrastructure megatrends such as decarbonization, digital transformation, and asset modernization. With a distribution rate of 11.7% and a discount to NAV of 10.4%, MEGI includes a diverse range of infrastructure assets, including pipeline stocks, clean energy plays, communications-infrastructure property owners, data center REITs, and more. While MEGI has faced challenges in the markets due to its broad mandate and timing, it presents an opportunity for investors to capitalize on deep discounts.
The BlackRock Health Sciences Term Trust II (BMEZ) is a term fund specializing in healthcare and biotechnology firms, offering a distribution rate of 14.0% and a discount to NAV of 13.2%. With holdings in companies like Amgen, Intuitive Surgical, and West Pharmaceutical, BMEZ generates income through covered calls rather than leverage. However, the fund has underperformed in recent years compared to plain healthcare ETFs, leading to a less enticing discount to NAV despite its high yield.
Lastly, the BlackRock MuniYield Quality Fund III (MYI) is a CEF focused on high-investment-grade municipal bonds, offering a distribution rate of 5.8% and a discount to NAV of 9.9%. With a portfolio of nearly 300 muni bonds, predominantly long-term in nature and with outstanding credit quality, MYI provides tax-exempt income that may be more attractive to investors in higher tax brackets. Although the fund experiences more volatility due to its high leverage, it remains a decent CEF option for investors seeking monthly yield.
Overall, CEFs present compelling opportunities for investors looking for value and yield in today’s market. Despite some challenges and risks, funds like GDV, KYN, MEGI, BMEZ, and MYI offer unique investment propositions with the potential for attractive dividends and discounts to NAV. By carefully evaluating each fund’s strategy, performance, and discount level, investors can build a diversified portfolio that meets their income and growth objectives in a challenging market environment.
