HPI - LDP: A Declining Dollar Creates Risk For Preferred Stocks

2025-05-06 05:34:28 ET

Summary

• The Cohen & Steers Limited Duration Preferred and Income Fund offers a 7.85% yield, higher than domestic fixed-income indices but lower than similar closed-end funds due to lower leverage.
• Despite a recent 2.82% share price decline, the fund outperformed the preferred stock index, showcasing effective management and strategy.
• U.S. preferred stock has become less attractive to foreign investors over the past few months, and rate cuts by the Fed could make this problem worse.
• The fund's net investment income did not cover its 2024 distributions, relying on realized gains, posing a risk to future distribution sustainability.
• Trading at a 6.01% discount to NAV, the fund is more expensive than its three-year average, with potential downside due to a declining U.S. dollar.

The Cohen & Steers Limited Duration Preferred and Income Fund ( LDP ) is a closed-end fund that seeks to provide its shareholders with a very high level of income. At first glance, the fund appears to do this quite well as it boasts a 7.85% yield at the current share price. This is well above the yield of any major domestic fixed-income index, as shown here:

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