NPFD: Discount Remains Unappealing And In The Wrong Environment
Nuveen Variable Rate Preferred & Income Fund remains a 'Hold' as rate sensitivity and a modest discount limit appeal. Despite its name, NPFD is mostly fixed-to-fixed rate preferreds, resulting in a leveraged-adjusted effective duration of 5.53 years leading to meaningful interest rate risk. Distribution coverage is pressured, with net investment income coverage lacking and likely to fall even shorter going forward.
NPFD: Rising Rates May Increase Risk Profile
Nuveen Variable Rate Preferred & Income Fund remains a hold as dividend coverage and NAV stability face headwinds from potential rate hikes. NPFD's 10% yield is unsustainable; a 30% dividend cut would better support NAV and long-term performance. The fund's shrinking discount to NAV and high leverage amplify downside risk in a deteriorating debt market.
NPFD: Strong Results But Discount Narrows, Making It A 'Hold' (Downgrade)
Nuveen Variable Rate Preferred & Income Fund has delivered strong total returns since our last update. This was partially driven by NPFD's discount having narrowed from over 8%, making the current valuation less compelling and justifying a "Hold" rating. The fund's 10.09% distribution yield relies on capital gains, with net investment income coverage at only around 70%, even after the distribution trim.
