NZF: A High Yielding, Well Run CEF, But The Distribution Is Likely Not Sustainable
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NZF, a high-yielding closed-end fund, offers a 7.33% distribution yield but faces sustainability issues due to its earnings coverage ratio and negative UNII. The fund's discount to NAV is less favorable, and it has significant leverage and interest rate exposure.

December 05, 2024 | 3:45 am
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NEGATIVE IMPACT
NZF offers a high yield but faces potential distribution cuts due to unsustainable earnings coverage and negative UNII. The fund's discount to NAV is less favorable, and it has high leverage and interest rate exposure.
The high distribution yield of NZF is attractive, but the unsustainable earnings coverage ratio and negative UNII suggest a potential distribution cut. The current discount to NAV is less favorable compared to its 6-month average, indicating a less attractive buying opportunity. Additionally, the fund's high leverage ratio and significant interest rate exposure add to the risk, potentially impacting the stock price negatively in the short term.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 100