I’m in the process of trying to develop a screen for CEFs. I’ve read that investors can screen for CEFs on MSN stock screener and ETFConnect. At ETFConnect, investors can screen by types of CEFs such as fixed income or equity. Further down on the screen, users can choose between taxable or municipal, global or us, premium to discount, leverage or no leverage,
Wachovia’s Bush has a screen from an article on the The Street that selects CEFs in the double digits discount that has a valuation that is the cheapest in the last year and a current distribution greater than 5%. I think that’s a good place to start.
I want to create a screen that that will select CEFs that have stable distribution in the past with discounts near it’s historic low. Right now, I have not seen any screen that gives users these options. I want CEFs to have maintainable distributions so that there will be no return of capital (ROC). As of now, I would usually have to look up the information of the funds that look interesting one by one.
I want CEFs with a decent yield, not too high or low; One around 6 to 8 percent with a stable distribution that the fund can handle. I do not want to get CEFs with yields higher than 10 percent because it is very difficult for these funds to maintain that distribution without returning some capital. Sooner or later, they will have to cut their distribution and the price will drop. These high yielding funds also more risk than funds that pay an average amount.
Leveraged CEFs are more risky than ones that do not use leverage. Right now, I do not think it is a good time to buy leveraged CEFs because interest rates are still rising and these funds are suffering because of that.
My strategy is to use CEFs for the fixed income portion of my portfolio. My fixed income portion of my portfolio will be about 20 - 30 percent. I plan to hold the CEFs long term. I will only sell them if their discount narrows considerably or if the fundamentals deteriorate.
Morningstar CEF forum is a great place to learn about CEFs. There are some knowledgeable people in there who have been investing in CEFs for a long time. Some of them live off their CEF portfolios.
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I like your screening strategy for finding ETF’s at good buy entry points for stable income. The process of finding them on ETF Connect is very laborious. Is there a link of the “Street” article screen?
I do not know where the someone can use a screener like the one the used on “the street”. Most screeners are very limited or require users to pay to have access to their screens, which is not that worth it.
We have The Scott Letter: Closed-End Fund Report and a weekly CEF data service that may be of interest. Please call me at 1-800-356-3508 or check out our website: http://www.cefadvisors.com.
JCS
New to CEFs!
Hi guys… I was hoping you can help me demystify some things about CEFs.
I’m new to CEFs. The reason why I started looking at them is because I am looking to build an income portfolio. I came across the CEFA site which has a pretty good screener.
However, I cannot make a decision between which CEF to pick because I don’t fully understand the significance of Income Only Yield, Distribution Yield, and Dividend Yield. I am hoping you can help me answer this if you have time.
I read the definitions on the CEFA website but they are not so clear. My question is, if I am trying to maximize my fixed income returns (monthly, or otherwise), what should I look at? Income Only Yield or Distribution. I read somewhere that Distribution is different from Dividends because it could include, amongst other things, paid-in capital.
So in essence the Distribution Yield could be misleading… it could just be the CEF giving me my money back! I don’t see any website showing what amount of the Distribution Yield is the paid-in capital.
Please advise,
Thanks
Kim