Investing the Middle Way submits: As they say, demographics is destiny. One big theme I have tried to keep in mind is the aging Western population and the need for quality fixed income securities. In this vain, I wrote a while ago
about closed-end muni bond funds. Today I’ll discuss some other classes of high yield closed-end funds and highlight, as I always do, several personal holdings.
Equity income
This class of closed-end funds invests primarily in high yielding stocks or preferred stocks. Some funds may hold a minority of corporate bonds as well. Yield to common shares may be further boosted by using leverage (similar to muni bond funds but through preferred shares). My favorite in this category is the Evergreen Utilities & High Income Fund (ERH) which sports a 2006 return of 65%. Its main holdings are in the utility and telecommunication services sector. Both Yahoo Finance and ETFconnect show a yield of 8+% based on a monthly dividend of $0.20, but that is not the whole story. ERH has given special annual dividends for the past two years, e.g. $1.398 for 2006, that significantly increases its overall yield. I also like its country diversification: 47% of the fund is invested outside of the US. The utility sector has demonstrated tremendous strength lately and ERH outperformed XLU in the past year. There is one draw back however: the fund currently trades at a premium of 13.8%.
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