TOP WEBSITES FOR INCOME INVESTORS (KIPLINGERS)

KIPLINGER'S | March 2016

9 Top Free Sites for Income Investors

Five years ago, Kiplinger’s turned to longtime investment writer and in-house income guru Jeff Kosnett to launch a newsletter designed to steer income-starved readers to the best investments for dependable, spendable income. Today, Kiplinger’s Investing for Income continues to attract a growing army of satisfied readers.

How does Jeff uncover opportunities for his subscribers month after month? Of course, he spends a lot of time interviewing money managers and mutual fund masterminds, as well as the men and women who actually run real estate investment trusts (REITs) and master limited partnerships (MLPs). And he mines the Internet, searching for great ideas and studying the raw data to identify broad trends and profitable prospects. We asked Jeff to share with Kiplinger.com readers his favorite free sources for reasoned discussion and hard-to-find financial data. Bookmarking these sites will be a valuable step toward making you a more successful investor.

 

Closed-End Fund Center

Web address: www.cefa.com

Key data: Discounts and premiums to net asset value

Best for: Sorting and screening 629 closed-end funds

The keys to understanding any closed-end fund are data about current and historic discounts and premiums to net asset value, distribution rates, whether and how much the fund borrows (leverage), and total return on net asset value. This site offers all of that and more, plus the tools to sort and screen more than 30 varieties of funds in too many ways to count.

Kosnett Comment: CEFA’s tables show each fund’s distribution yield next to its income yield. The two won’t match, but they should be fairly close. If the income figure is low but the distribution is high, the fund is selling assets or issuing new shares to maintain the illusion of a fat yield. It could be headed for a distribution cut.

Eaton Vance Monthly Market Monitor

Web address: www.eatonvance.com

Key data: The numbers on all aspects of income investments

Best for: Total returns and average duration of bonds

This fund company’s site is loaded with free stuff. The best is the monthly monitor (accessible in the site’s Institutional Investors section): 40-plus pages of charts and tables about all aspects of stocks, bonds, bank-loan funds, commodities, industry sectors and more. All this — including total returns and average duration of more than 20 kinds of bonds — is nicely laid out on single pages.

Kosnett Comment: The page called “fixed income spread analysis” uses simple bar charts to show the current and past yield advantage of various categories, such as junk bonds or preferred stocks, over Treasuries. When the spread is unusually narrow, there’s more risk. When it’s wide, it’s usually a good time to invest.

FRED

Web address: www.stlouisfed.org

Key data: 382,000 statistical series from 82 sources

Best for: Financial data, graphs and charts from the government and everywhere else

If you want to see a trend in, say, inflation, growth, interest rates or stock-market returns for just about any period, you’ll find it here. This takes the place of any almanac, encyclopedia or reference book — and it’s updated daily. FRED is the acronym for Federal Reserve Economic Data and is the brainchild of the Federal Reserve Bank of St. Louis.

Kosnett Comment: You may go weeks or months without using this, and then you’ll refer to it several times in one sitting. It’s comforting to know that someone has gone to the effort of assembling all this info in one place.

SEE ALSO: 7 Promising Dividend Stocks Yielding 5% or More

FRED

Investing in Bonds

Web address: www.investinginbonds.com

Key data: Real-time market data on bond trading action and prices

Best for: Owners (or potential owners) of individual corporate and municipal bonds and anyone else who wants to see how bonds are priced and what they are yielding at any given time

Kosnett Comment:The Securities Industry and Financial Markets Association (SIFMA), the bond dealers’ trade association, runs the site and has a news feed as well. Some of the commentaries, though, are dated.

Robert W. Baird & Company

Web address: www.rwbaird.com

Key data: Relative yields of municipals and Treasuries

Best for: Analysis of taxable and tax-free bond markets

The managers of Baird Core Plus Bond fund and other excellent no-load income funds publish a combination of basics with just enough financial-market-speak to keep the pros happy with their Capital Markets Perspective. The insights live at Baird’s corporate site (address above) not the Baird Funds' consumer site. Offerings include both tax-free bond and taxable-bond commentaries. A recent subject is the tight supply of new bonds, which keeps prices high and yields low. There is also a colorful market commentary called, ahem, The Bull and Baird Blog.

Kosnett Comment: Baird’s municipal bond letter illustrates such basics as the ratio of tax-free bond yields to Treasury yields and the equivalent yield you need to earn on a taxable investment to net the same after-tax income.

Pimco

Web address: www.pimco.com

Key data: Outlooks and forecasts from the fixed-income behemoth (with $1.43 trillion under management) formerly known as the Pacific Investment Management Company

Best for: Investors who like to see commentaries and explanatory articles that put the market’s gyrations in perspective. For example, an article called “Emerging Markets Trying to Turn the Corner” makes the case for some, but not all, investments in those countries. The Pimco blog about the issues of the day is well-presented and with graphics.

Kosnett Comment: The departure of Bill Gross from Pimco changed this site from his soapbox to more of a team effort.

EMMA

Web address: www.emma.msrb.org

Key data: Muni bond trading details

Best for: Screening the tax-free bond universe for top yields

Electronic Municipal Market Access, from the Municipal Securities Rulemaking Board, shows every municipal bond trade, plus key background information about thousands of issuers. If you own tax-exempts, you can see a price graph for each bond based on months of trades, just as you can chart a stock or a fund. You can also screen the tax-free bond universe in detail. For example, when you search for all AA-rated Arizona water and sewer bonds due between 2024 and 2029, up pop the yields and other particulars.

Kosnett Comment: EMMA is easier to navigate if you know your bond’s CUSIP number.

REIT.com

Web address: www.reit.com

Key data: Historical returns and other performance information for real estate trusts going back to their invention in the 1960s.

Best for: Avid real estate investment trust fans and anyone who wants to see new offerings and news tidbits about the industry and its members. The site is run by the National Association of Real Estate Investment Trusts (NAREIT).

Kosnett Comment: It would be good if NAREIT would link to a resource that provides up to the minute data on the individual REITs’ net asset values and prices to book value. You need a brokerage link to that kind of research.

TCW

Web address: www.tcw.com

Key data: Monthly updates by sector, such as the High Yield and Mortgage Market updates. Find it all under Insights from TCW, a global asset management firm.

Best for: Bond fund investors, especially if you dabble in risky or unusual areas like junk bonds, mortgages and bank loans. There are also excellent forecasts and commentaries from the portfolio managers and analysts.

Kosnett Comment: This is some of the best perspective on individual bond-market segments and what’s driving them up or down.

Floating Rate Loan Funds (Morningstar)

Five Senior Loan CEFs for Your Radar

Five Senior Loan CEFs for Your Radar
By Cara Scatizzi | 08-13-10

Senior bank loans are typically extended to below-investment-grade companies, which can translate to higher interest-rate payments for banks and investors. After a bank lends the money, it sells the loan as a security to investors and passes the interest payments to investors. Such bank loans are structured to produce yields higher than comparable bonds and also to mitigate certain risks that accompany fixed-income investing.


Senior loans are often short term and have floating interest rates. This reduces interest-rate risk for investors because, as interest rates rise, the short-term floating rates on the loans can be reset quickly to reflect higher rates. Conversely, if interest rates are falling, the floating rates will reset to echo lower rates, which means investors cannot lock in high interest rates with this type of security.


In addition, these loans are secured by cash or assets and are considered "senior." This means that, in the event of bankruptcy, these obligations are the first to be repaid. There is no guarantee of any payment after a default, but because the loans are senior and secured by assets, historically, investors have received $0.75 to $0.80 per dollar in such situations.


Investing in closed-end funds, in general, has many benefits. First, CEFs can use leverage in an effort to enhance performance and distributions. CEFs are also required to distribute income to investors. In addition, CEFs often sell at discounts to net asset value, which means investors can achieve "yield enhancement." Finally, there is an added benefit of diversification. Specific to senior bank loans, CEFs hold hundreds of individual bank loans of varying credit quality and maturity. If one or a few of the companies default on their bank loans, it will most likely have a small effect on the overall portfolio. However, bankruptcy is not the only way for a senior loan to lose value. Deterioration of the individual company's credit can cause a loan to fall in value.


There are 19 senior bank CEFs and only one does not use leverage (the newly created Blackstone/GSO Senior Floating Term Rate (BSL). The remaining CEFs use leverage in the form of debt and preferred shares, which is regulated by the Investment Act of 1940. In addition to senior loans, these types of CEFs also invest in corporate bonds and cash. Ten of the 19 senior loan CEFs trade at a discount to net asset value, which offers investors a yield enhancement via their discount.


Investors seeking the higher income that senior bank loans can offer should be aware of the risks to their underlying capital. The group produced volatile returns in 2008 and 2009, as would be expected given the changes in interest rates, the inherent volatility of leverage, and the turmoil in the credit markets. The average senior loan CEF has gained 0.19% annually over a five-year period, is down 2.97% annually for the latest three-year period, and is up 6.5% in the year to date.

A Closer Look: Five Senior Loan CEFs

Discount /Premium (%)Distribution Rate at Current Price (%)1-Yr Distribution Change (%)Leverage Ratio (%)

Highland Credit Strategies (HCF) -2.1 8.68 0 23.6
Nuveen Senior Income (NSL) +2.4 6.92 19 36.5
Nuveen Fl Rate Inc Opps (JRO) -0.6 6.63 24 36.5
Nuveen Floating Rate Inc (JFR ) -3.9 5.56 24 35.6
LMP Corporate Loan Fund (TLI) -5.8 5.17 20 52.0

The table above lists five senior loan CEFs that, in our opinion, look attractive. Exclusion from the above list does not reflect our dissatisfaction with a fund. Instead, these are the five that have caught our attention at the moment. None of the listed CEFs have decreased distributions in the last year and four of the five have increased the distribution at least once over the last year. In addition, none of them uses return of capital to synthetically boost stated yields.


Highland Credit Strategies (HCF ) has a distribution rate of 8.7%. The fund has not increased the distribution in the last year, but while 13 of the 19 funds in this category decreased distributions, HCF did not. The fund came out of the gates in 2007 and performed poorly, as might have been expected given the credit-market environment at the time. The fund has lost 10.8% per year since inception. However, in early 2009, the fund replaced the portfolio-management team with two new managers, who have outperformed their peer group over the one-year (HCF gained 21.9% versus the peer group's gain of 20.2%) and year-to-date (HCF is up 7.95% versus 6.55% for the peer group) periods. HCF holds 63% in bank loans, with the remainder in low and non-investment-grade corporate bonds and equities. Its largest holding (7.3% of the portfolio) is a holding company for venture healthcare companies. Finally, HCF has a leverage ratio of 23.6%.


Nuveen Senior Income (NSL) is one of three highlighted funds from Nuveen. All three funds are managed by Gunther Stein. NSL is selling at a 2.4% premium to NAV but still offers a 6.9% distribution rate. The fund increased the distribution twice in the last year for a total increase of 19%. In 2009, the fund gained 111% in net asset value (versus the peer group, which gained 76%), during which the fund's share price jumped from a 12% discount to NAV to a 17% premium to NAV in the final four months of 2009. Since inception in 1999, the fund has gained 5.3% annually. 86% of assets are held in bank loans with the remainder in high-yield corporate bonds, convertibles, and cash. The largest sector concentration is media, at 11% of assets. The fund has a 36.5% leverage ratio.


Nuveen Floating Rate Income Opportunities (JRO) has a 6.6% distribution rate and has boosted its distribution twice in the last year for a total increase of 24%. The fund invests 87% of its assets in senior loans and the remainder in junk bonds, cash, and a very small portion in common stock. The current leverage ratio is 36.5%. The fund has performed about as well as the peer group, with the exception of 2009, when the fund outperformed with an impressive NAV gain of 113%. Since inception in 2004, the fund has gained 4.1% annually. Historically, the fund has traded at a discount to NAV (its three-year average discount is 8.04%), but 2010 has proved a volatile year for JRO's premium and discount. In April 2010, the fund shot to at a historically high 9.46% premium, only to drop to a discount of 6.75% in late May. Currently, the fund sells at a slight 0.60% discount to NAV.


Nuveen Floating Rate Income (JFR) has a current distribution rate of 5.6% and is selling at a 3.9% discount to NAV. The fund has increased its distribution twice over the last year for a total increase of 24%. JFR has a current leverage ratio of 36.5%. In 2009, JFR gained 101% and in 2008 the fund lost 50.1%, still slightly beating the peer group. Since inception in 2004 the fund has gained 3.71% annually. JFR holds 86% in bank loans of mostly low credit quality, though 7% of its holdings are bonds rated AAA.


LMP Corporate Loan Fund (TLI) has the lowest distribution rate of the highlighted CEFs, but it is still attractive on an absolute basis. In addition, the fund is selling at the largest discount (5.8%) of the funds listed, making it even more attractive. TLI has increased its distribution twice in the last year for a total increase of 20%. The fund holds 93% in bank loans, with the remainder in corporate bonds and short-term debt. TLI has a relatively high leverage ratio of 52%. Since inception, TLI has gained 4.5% annually. In 2008, when the average senior bond CEF lost 51%, TLI lost 44%.





Cara Scatizzi is a closed-end fund analyst at Morningstar.

Investing in Master Limited Partnerships (WSJ)

AUGUST 10, 2010 Frenzy in Energy Partnerships
Investors Stick Billions of Dollars Into a Stock-Market Niche Known as MLPs
By TOM LAURICELLA And CAROLYN CUI
Lured by hefty yields, investors are pouring billions of dollars into a small corner of the stock market—energy-focused master limited partnerships—which has seen a huge rally of 15% this year. And that makes some people nervous.

MLPs are mostly companies that own and operate pipelines, primarily for natural gas and oil. Benefiting from the tremendous expansion of energy infrastructure in the U.S., MLPs essentially collect rent from energy producers who use their facilities.


Over the past decade, the Alerian MLP index, the main benchmark for the group, is up about 11% a year. That is a handsome payoff compared with the Standard & Poor's 500-stock index, which is down 2.6% a year. Their major appeal is payouts to investors these days averaging around 7% a year at a time when bond yields are at all-time lows. MLPs are expected to increase those distributions by another five percentage points or so a year.

But the recent surge in popularity of MLPs may be adding a new element of risk to the group. The Alerian index, including distributions, has returned 21% in 2010 without any meaningful change to the sector's fundamental outlook. Instead those gains are seen as being fueled by the rush of new money into the sector. Meanwhile, most MLP funds concentrate their portfolios in a handful of the same stocks. The end result is MLPs could be growing vulnerable to a decline in prices.

"We think the sector is a bit frothy in the short run," said Ethan Bellamy, an analyst at Wunderlich Securities Inc.

The big yields of MLPs are the result of their corporate structure. While they trade like stocks, the companies generally distribute all their profit to shareholders because of their limited partnership status. Better yet, those distributions usually aren't taxable until investors sell the shares.

Another selling point for MLPs is their diversification. They have low levels of correlation to the rest of the stock market and to U.S. Treasurys. In June, for example, when the S&P was down 5.2%, the Alerian index was up 5.6%.
MLPs have changed markedly over the years. In their early days in the late 1980s, the underlying businesses ranged from hotels to basketball's Boston Celtics. But concerns were soon raised that some companies were exploiting MLPs to avoid taxes. Laws were tightened and MLPs are now limited to energy and certain natural-resource companies, mainly pipelines and storage for natural gas and oil.

The proliferation of MLP funds started with the launch in June 2009 of the J.P. Morgan Alerian MLP Index Exchange Traded Note, which has pulled in $1.6 billion. On March 30, SteelPath Advisors, an offshoot of Alerian, opened the doors on three MLP mutual funds that have taken in nearly $300 million.

But the floodgates have really opened in the past two months. Legg Mason's Clearbridge unit and MLP veterans Tortoise Capital Advisors each launched MLP closed-end funds and attracted more than $2 billion from investors. With leverage, the funds will be investing some $2.7 billion. And still more funds are in the works, including an exchange-traded fund.

All this money is pouring into a small space. There are roughly 70 MLPs with a total market value of about $200 billion. Only about three dozen of those names trade actively. And the Alerian benchmark is heavily concentrated; the top five names comprise 41% of the index.

At Tortoise, for example, the firm's new $1.1 billion Tortoise MLP Fund, which hasn't yet disclosed its holdings, will specialize in natural-gas MLPs. But its two other biggest funds already have about 52% of their combined $2 billion in assets in natural-gas MLPs. And many of those names are big holdings in the Alerian index.

"Everybody's buying the same top 10," says Jason Stevens, who follows MLP stocks for Morningstar.

Meanwhile, the performance of MLP stocks has been extremely uniform, suggesting little differentiation by investors among individual MLPs. Among 10 oil-pipeline MLPs tracked by Wunderlich Securities as of Aug. 4, seven are up 29% to 41% in the past year, and another two are up 20% or more.

Jerry Swank, founder of Dallas-based Swank Capital LLC, which manages an MLP portfolio of $1 billion, says he is concerned about "a temporary imbalance between supply and demand" that could potentially reverse into a selloff.

The rally already has pushed down yields. A year ago, MLPs on average yielded 8.8%, but that has dropped to 6.3%, Wunderlich Securities says.
Michael Blum, an MLP analyst at Wells Fargo Securities LLC, figures MLPs are trading at a multiple of 11.8 compared with 12 over the past five years using discounted cash flows, the standard metric for valuing MLPs.

"MLPs look fairly valued," Mr. Blum says.

But valuation concerns mightn't prove a deterrent as investors chase distributions and growth that have yielded far more than other investment options.

"We see the typical MLP increasing its distributions by 5% a year," said Morningstar's Mr. Stevens. "And if you've got securities yielding 6% to 8% … you can lock up a 12% gain."

Supporting that optimism is that MLP clients sign long-term contracts, often for 10 or 15 years. Those contracts often contain clauses that increase the fees paid to MLPs to adjust for inflation.

Still, the longer-term outlook for MLPs isn't risk-free. MLPs increase their distributions one of two ways: They either build or buy new pipelines and storage facilities. Both avenues require tapping the stock or bond markets to pay for their expansion. Any interest-rate increase will result in higher borrowing costs and potentially smaller payouts for investors.

And their tax-deferred appeal could be at risk if Congress revisits their tax status. Says Christopher Eades, a portfolio manager on the Clearbridge Energy MLP Fund: "An investor in MLPs has to watch what's going on in Washington extremely carefully."
Write to Tom Lauricella at tom.lauricella@wsj.com and Carolyn Cui at carolyn.cui@wsj.com

Closed End Funds - Municipal Bonds (the Street,com)

Top-Rated Closed-End Funds Buy Bonds
Kevin Baker
05/26/09 - 12:12 PM EDT


The closed-end funds that won the best grades from TheStreet.com Ratings at the end of April invested in fixed income, especially municipal bonds.

We issued grades for 634 closed-end funds that had at least one year of trading history as of April 30. Of them, 311 funds earned "buy"-level ratings of B-minus or better.

The Van Kampen Bond Fund (VBF Quote), one of 23 funds we rated A-plus, has returned 14% in the year through April 30. This fund outperformed its peers by holding the investment-grade debt of Wells Fargo (WFC Quote), General Electric (GE Quote), Goldman Sachs (GS Quote) and AT&T (T Quote).

The MFS Intermediate Income Trust (MIN Quote), which gained 11%, buys debt issued by the governments of the U.S., Japan, the U.K., France, Italy and Germany. It also holds the corporate borrowings of Citigroup (C Quote) and ConocoPhillips (COP Quote).

The MFS Government Markets Income Trust(MGF Quote), another A-plus fund, gained 10.8% on a portfolio comprised mostly of Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote) mortgage pools. Corporate debt from Time Warner Cable (TWC Quote), Kraft Foods (KFT Quote) and other companies made up 6% of assets, revving up returns.

Best-Rated Closed-End Funds
Fund (Ticker) Rating Reward Grade Risk Grade Objective Total Return 1 Year
Van Kampen Bond (VBF) A+ A+ B- General Bd - Investment Grade 14.04%
MFS Intermediate Income Trust (MIN) A+ A+ B Global Income 11.26%
MFS Government Markets Income Trust (MGF) A+ A+ B- Global Income 10.75%
Nuveen NY Muni Value (NNY) A+ A+ B Municipal Single State 4.87%
Western Asset Managed Municipals (MMU) A+ A+ B- Municipal - National 4.32%
Nuveen NY Select Tax-Free Inc Port (NXN) A+ A+ B Municipal Single State 3.21%
Morgan Stanley Insured Muni Bond (IMC) A+ A B Municipal - National 2.91%
Neuberger Berman CA Inter Muni Fund (NBW) A+ A B Municipal Single State 2.28%
Nuveen Select Tax-Free Inc 3 (NXR) A+ A+ B Municipal - National 2.05%
Nuveen Select T-F Inc Portf (NXP) A+ A B Municipal - National 1.54%
Source: Bloomberg & TheStreet.com Ratings