We have updated most of the leverage ratios for the preferred stock issues of closed end funds. There are some that have not released recent data on their leverage.
As most of you are aware preferred stock issued by closed end funds must maintain at least a asset coverage ratio of 200%. This is extremely important to some of us conservative investors.
Virtually all preferred stock issues outstanding are the named Gabelli issues or are from Ellsworth or Bancroft, both of which are Gabelli managed funds. Most Gabelli issues are extremely highly rated (although there are a couple issues which are unrated).
The coverage ratios for all CEF preferred issues fell in the period ending 12/31/2018 as would be expected given the equity selloff in December, but most remain in very good condition.
NOTE that I personally am not a fan of most of the closed end fund issues (common shares)–but you don’t have to be a fan of the CEF to buy their preferred shares.
The most conservative of income investors should give plenty of consideration to owning some of these issues. We should disclose we own a number of these issues and while the coupons and/or current yields are fairly modest the peace of mind is always most welcome. Most of the Gabelli issues are superior in quality to any utility issue that is out there.
Since most of these issues are perpetual preferreds the shares price may move around a fair amount as interest rates rise and fall the safety of the dividend is unmatched by other preferred issues.
We prefer to own preferreds shares from the closed end funds that own level 1 securities (level 1 means that the price of the holding–i.e. common stocks is observable and known everyday as they trade on security exchanges).
The following preferreds may be just fine, but their assets are level 3 in many cases and thus the asset coverage ratios are in the “just trust me” category as they are not traded on exchanges where the prices can be observed.
- Eagle Point Credit Company
- Oxford Lane Capital
- Priority Income Fund
- RiverNorth Marketplace
We note that Priority Income Fund and RiverNorth Marketplace are not publicly traded CEF’s. This means they own level 3 assets and 1 can’t even observe the issuers share price as this is no regularly published share price.
Disclosure–we own the following issues-
- Gabelli Utility Trust (NYSE:GUT-C)
- Ellsworth Growth and Income (AMEX:EGF:A)
- AllianzGI Convertible (NYSE:NCV-A)
- AllianzGI Convertible II (NYSE:NCZ-A)
- Kayne Anderson MLP (NYSE:KYN-F)
- Tricontinental Fund (NYSE:TY-P)