WMB - EMO: An Alternative Way To Play This Fund With Capital Gains Potential

2024-07-15 16:09:07 ET

Summary

• ClearBridge Energy Midstream Opportunity Fund focuses on midstream master limited partnerships and corporations, offering high yields and stable cash flows.
• The EMO closed-end fund's current 6.50% yield is higher than most equities, but it still lags many of its peers in terms of yield.
• The fund is in the process of merging with other ClearBridge energy infrastructure funds.
• The merger means that the best way to obtain this fund's shares today is to purchase one of the targets.

The ClearBridge Energy Midstream Opportunity Fund ( EMO ) is a closed-end fund, or CEF, that focuses on investing in midstream master limited partnerships, or MLPs, and corporations. This is a sector in which very few broad-market funds invest. There are a few funds, such as the LMP Capital and Income Fund ( SCD ), that invest 20% or so of their assets in these companies, but most funds largely exclude them.

One reason for this is taxation, as funds taxed as registered investment companies are highly limited in their ability to include master limited partnerships. This is a shame, as many of these companies have substantially higher yields than other things in the market. They also enjoy relatively stable cash flows backing their distributions, which tends to make them pretty good as income vehicles....

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