I added to my position of the RiverNorth Opportunities Fund 6% perpetual preferred (RIV-A) yesterday at $23.06–around a 6.50% current yield. This is likely my last buy of the CEF preferred as I have now moved to an overweight position.
While the current yield is below where I would like it to be (above 7%) no one can buy the bottom and sell the top – certainly not me.
It is my opinion that this is the best buy out there for conservative income investors. Their asset coverage is almost 3x – as of 4/30/2023 and virtually all their assets are level 1 (stocks and bonds) which I prefer versus level 3 (i.e. CLOs etc). I like to be able to see what their holdings are trading at – exactly – not someones ‘quess’.
This CEF preferred offers a A1 rating from Moodys. Why does this trade at a discount to equally or lower rated Gabelli closed end fund preferreds? As has been said many times on this site ‘names matter’. Gabelli has a longer history and Mario Gabelli is a known person—this is worth a couple bucks per share.
I notice that the RIV-A issue has jumped up a bit yesterday afternoon and today–it remains a solid pick for conservative folks.
Not my intent to toss any grammatical-grenades here, I toss plenty unintentionally, but you had me going there with “‘quess'”. Considering the placement of the ‘q’ and ‘g’ on QWERTY keyboards I was hoping it was a Reese’s-Peanut-Butter-Cup word, as in, a serendipitous combination similar to ‘guesstimate.’ Usage example, “The analyst was notorious for his numerous ‘quesses’ (i.e., Questionable-gUESSES if you crack your eggs on the big end, otherwise, QUEStionable-guesSES for less sensible folk) incorporated into his extensively worthless DCF models.”
I ‘know’ people with positions in this. How many A rated pfds are out there?
But what are the risks to the pfd if the CEF itself is under pressure? RIV trades with leverage yes. And what happens if the they have to liquidate some of the fund because leverage exceeds allowed limits??
It appears…….RIV has a 13% yield. Is at a multi year low. And is margined at 35%
If you Prefer – they have tons of ‘tricks’. RIV did a common share rights offering to sell shares last December and sold $32 million in new common shares (which bolsters the preferreds position as they have 1st claim).
https://www.sec.gov/Archives/edgar/data/1501072/000139834422021681/fp0080727-1_497ad.htm
They could merge with other funds that are not levered and drop the leverage way down. Aberdeen Income (ACP_A) did that recently–they had to suspend the preferred payout for a few days as they fell under 200% – they merged with some other CEF funds and when all was said and done their coverage rose to 375%. They can sell holdings and redeem the preferred (at anytime if they fall under the leverage rule).
Thanks for the post Tim. I am a fan of CEF preferred as part of my “core” holdings. As such, I am willing to to accept a more modest yield in trade for implied safety. Currently holding RIV-A, GNT-A, and TY-.
Proto123–I love them to the heavens – but have to balance the safety/meager dividends with some of 7-8% issues.
Thanks Tim. What is considered a full position? Is that say 5% of a total portfolio?
I had been adding RIV-A regularly the last few months. Today I sold some ACP-A that had run up a bit since I bought a few months back to rotate a little more into RIV-A and some other things.
porcupine73–of course it is different for everyone–for me maybe 3-4% I would consider a full position. You can see at this moment I hold a lot of positions–most NOT full–alot that are 1%. Some I wanted more, but chickened out of getting more and now they are running (smaller banks)
On that ACP-A they suspended dividends for a couple days last year–then they did some mergers with some other funds and their coverage went from 195% to almost 375% so they are good now – but pricey – probably good to leave them for better deals elsewhere.