I have written about MFS Intermediate Income Fund (MIN) on a few previous occasions, most recently here. I have extolled its virtues as a defensive play in a bear market scenario.
In this brief article, I wish to provide an update on MIN's recent release of its breakdown of the May monthly dividend, which to me shows a change in its income sources.
MIN is high on my watch list, as it certainly appears that the markets could be turning down as this is written. At a minimum, volatility seems to be increasing, particularly when one notes how the market averages had some pretty wild swings last week.
A Quick Summary Of MIN
MIN is a closed-end fund [CEF] that seeks to provide income by investing in short and mid-term high grade securities. Its portfolio is global in scope.
Of late, MIN's performance has been abysmal at best, with both its price per share and net asset value [NAV] hitting new lows on an almost a daily basis. At its Friday closing price of $5.70 the current yield is now 9.07%. On the encouraging side (really encouraging) is the fact that MIN is now selling at a 4.52% discount to NAV. MIN has only sold at a discount two times in the past year, and to my knowledge both times the discount was very small.
Some 97% of its portfolio is global, with 62% invested in corporate bonds and 28% in government bonds. As are most investors today, I too am skittish on bond investments. However, 60% of MIN's investments are grades A, AA, and AAA, with the remainder rated BBB. The average duration is only 3.8 years and portfolio turnover is presently 16%.
MIN's Recent Release
On May 31, MFS Investments released a breakdown of MIN's May dividend composition (below).
Net Investment Income $.01477
Short-Term Cap Gains $02115
Long-Term Cap Gains $.00716
Return Of Capital $0.00
Total Distribution $.0431
Over the previous months, MIN's dividend has been comprised of significant return of capital.
Should Potential Inve! stors Be Encouraged?
In prior articles I have shown how MIN has performed in bear markets (excellent). I have to say that I am encouraged by both the dividend breakdown and the discount to NAV.
MIN (on a day-to-day) basis seems to be up on days when the market averages are down, and down on days when market averages are up. This seems to be the case today (Monday) also. As I write, the DOW is up close to 100 points and MIN is down $.05.
Summary
As far as the Protected Principal Retirement Strategy portfolio goes, I will continue to watch MIN's near term performance. Where previously I was "iffy" about adding MIN, I believe that if the market turns down in a serious manner I will initiate a small position. After all, where can one get a 9% yield on a bank account?
Disclaimer: This article does not constitute either a buy or sell recommendation on any of the stocks or funds mentioned.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MIN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
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