NIE - NIE: This CEF Is A Surprisingly Good Equity/Convertible Offering From Virtus

2024-04-01 12:59:40 ET

Summary

• Virtus Equity & Convertible Income Fund aims to provide investors with an attractive level of income without sacrificing the upside potential of investing in equities.
• The NIE closed-end fund invests substantially in convertible securities, which offer higher yields than common equities and potential benefits if the company's stock becomes valuable.
• The NIE CEF's performance has been solid, with a 12.57% increase in share price since the previous article was published, and it has a reliable history of distributions.
• The fund is currently trading at a discount on net asset value and has fully covered its distribution over the past year.
• The big risk is that the Federal Reserve does not cut interest rates, but commentary from its officials suggest that it is determined to do so.

The Virtus Equity & Convertible Income Fund ( NIE ) is a unique closed-end fund, or CEF, that aims to provide investors with a fairly attractive level of income without requiring that they sacrifice the upside potential of investing in common equities. However, this is not an ordinary equity income fund, as it does not specifically invest in dividend-paying stocks or some other conventional method to obtain a relatively high yield from the assets in its portfolio. Rather, the fund heavily invests in convertible securities, which are fixed-income assets that have the ability to be exchanged for equity in the issuing company should certain conditions be met.

Thus, these securities provide higher yields than can be obtained from common equities but still allow investors to receive some benefits should the company’s common stock become incredibly valuable. We frequently see business development companies or any investor doing private financing rounds demand these securities for this reason. The Virtus Equity & Convertible Income Fund does manage to provide its shareholders with an attractive 8.93% yield through its investments in these securities....

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