Several high-yield dividend municipal bond funds have recently increased their payouts by more than 30%, providing investors with a tax-free dividend yield of over 7%. These funds are managed by Nuveen, a well-known manager in the municipal bond space. The Nuveen AMT-Free Quality Municipal Bond Fund (NEA) saw its payout jump 37%, resulting in a yield of 7.7%.
The increase in yields at these municipal bond funds has pushed them into the double digits for investors in the top tax bracket, with a taxable-equivalent yield of 12.2%. This offers a significant advantage over money-market funds, which are currently offering around 5% yields. The stability and high income provided by these funds make them an attractive option for investors looking for reliable sources of income.
Investors in the Contrarian Income Report service have seen significant returns from their investments in Nuveen municipal bond funds. The discounts to net asset value (NAV) of these funds, combined with the potential for future rate cuts by the Federal Reserve, indicate the potential for further gains in the coming months. As the economy slows down and recession risks rise, bonds, including municipal bonds, are expected to perform well.
The discounts to NAV of these municipal bond funds are currently around 10%, providing investors with an opportunity to buy these assets at a discount. The Federal Reserve’s cautious approach to rate cuts could lead to a rally in bond prices, benefiting all bond CEFs. Futures traders are already anticipating multiple rate cuts by the end of the year, which could further boost the performance of these funds.
While the recent payout hikes have led to a rally in the prices of these municipal bond funds, investors are advised to wait for a dip in prices before adding to their positions. This trio of high-yield municipal bond funds is expected to provide price stability and attractive dividends in the future, making them a compelling option for income-focused investors. Overall, the outlook for municipal bond funds remains positive, with the potential for further gains in the coming months.
