Eight tax-free closed-end funds to think about
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Dear Mr. Berko:
I have a $100,000 certificate of deposit that comes due next week, and the best yield I can get is 5.05 percent for 44 months. That’s ridiculous, because after taxes I would net about 3.4 percent. So I think I’d like to invest this money in a portfolio of tax-free closed-end funds that yield more than 8 percent. I feel tax rates will increase in the next two years — probably more than most of us think. I know that 8 percent is high, but I can afford the risk. So give me a half-dozen or more to look at.
G.R., Portland, Ore.
Dear G.R.:
Here are eight tax-free closed-end funds that should meet your requirements. Each yields 8 percent or better, which means they have many speculative issues in their portfolios.
I agree with you that tax rates will increase, and those increases are going to anger a lot of voters who were told that they would not pay higher taxes. A politician running for office is like a man pleading for his life; he will promise his executioner anything to be spared. A politician will make any promise to the voter to be elected to office. So good luck to you on the following funds, each of which is high on my risk scale.
Pioneer Municipal High Income Municipal Advantaged Trust (MAV-$7.85) has a portfolio that’s 33 percent leveraged and about 78 percent of that portfolio is rated BBB or lower. The 7.5 cent monthly dividend yields 11.5 percent, which is a taxable equivalent of 15.9 percent.
TS&W/Claymore Tax-Advantaged Balanced Fund (TYW-$6.56) is a hybrid fund. It splits its portfolio into two parts: a diversified portfolio of value stocks and a portfolio of municipal bonds rated A or higher. The 25.3 cent quarterly dividend yields 15.4 percent. About 37 percent of the portfolio is leveraged. About 60 percent of the portfolio is tax-exempt, and 40 percent qualifies for long-term capital gains.
Van Kampen California Value Municipal Income Trust (VCV-$8.27) has a portfolio that is 40 percent leveraged with California municipals, some 72 percent of which are rated A or better. VCV’s 7.3 cent monthly dividend yields 10.6 percent, a 14.6 percent taxable equivalent.
Van Kampen Massachusetts Value Municipal Income Trust (VMV-$9.81) has a portfolio that is 40 percent leveraged in Massachusetts municipal bonds, 82 percent of which are rated A or better. VMV’s 6.8 cent monthly dividend yields 8.3 percent, which is an 11.5 percent taxable equivalent.
BlackRock Municipal Income Trust’s (BBF-$9.93) portfolio is 37 percent leveraged, and 69 percent is rated A or better. The 7.3 cent monthly dividend yields 8.8 percent, which is a 12.2 percent taxable equivalent.
Federated Premier Municipal Income Fund (FMN-$9.55) has a portfolio that’s 38 percent leveraged and about 55 percent of which is rated A or better. The 6.7 cent monthly dividend yields 8.4 percent and its taxable equivalent is 11.6 percent.
Morgan Stanley Municipal Opportunities Trust III’s (OIC-$6.89) portfolio uses no leverage, and the 4.8 cent monthly dividend yields 8.4 percent, which is an 11.5 percent taxable equivalent. OIC’s portfolio is not rated.
Pioneer Municipal High Income Trust’s (MHI-$8.22) portfolio is 28 percent leveraged, and only 34 percent of the issues are rated A or better. The 7 cent monthly dividend yields 10.2 percent, which is a 14.1 percent taxable equivalent.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@comcast.net. © 2008 Creators Syndicate Inc.
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