HFRO: An 8% Dividend Yield From The Preferreds Of This Investment-Grade CEF

2025-09-29 19:54:20 ET

Highland Opportunities and Income Fund ( HFRO ) is a highly discounted closed-end fund ("CEF") with a diversified portfolio that has seen its equity value recover markedly since touching new lows in the summer. There are still some ways for the rally to go until the current divergence to its net asset value ("NAV") is closed. I've been buying the 5.375% Series A Preferreds ( HFRO.PR.A ) since January, when I last covered the security to highlight what was then a 33% discount to their $25 per share liquidation value, around 67 cents on the dollar. The discount still stands at 33%, but could be set to partially tighten with the Fed likely cutting rates by at least 50 basis points to end 2025. The CME FedWatch Tool has priced the probability of this at 67% , placing the Fed funds rate at a lower level than a year ago, when the preferreds were trading for 80 cents on the dollar. To an extent, preferreds are bond proxies, which means interest rates and Treasury yields form significant drivers of their value. ...

Read the full article on Seeking Alpha

For further details see: