Understanding real yield

In partnership with

Dividend Download

Top dividend stocks & news

Closed-End Funds for Income: Why a 9% “distribution rate” isn’t a 9% yield

Many CEFs display eye-catching 8%–12% distribution rates. That’s the latest payout annualized against today’s market price—not a pure measure of what the portfolio actually earns.

Parts of that payout may be funded by realized gains or return of capital (ROC), and it can change as prices move. Nuveen and FINRA both caution investors not to equate a CEF’s distribution rate with yield or performance.

What that headline number really means

Distribution rate = most recent regular distribution × 12 ÷ current price. It’s a shorthand cash-flow indicator, but it isn’t “income yield,” and it certainly isn’t performance. Sponsors (Nuveen, Eaton Vance) state plainly that distribution rates shouldn’t be confused with yield; monthly 19a notices disclose whether the latest check came from net investment income (NII), realized gains, or ROC.

Where the money comes from

CEF payouts can blend NII, realized gains, and ROC. That mix fluctuates month to month. Example: recent Section 19(a) posts from Cohen & Steers summarize each month’s sources, while a fresh UTG notice shows how much was income vs. capital gains. These notices are your first stop for sustainability.

A 5-minute check before you buy

  • Identify the label. Confirm you’re looking at a distribution rate on price, not SEC yield or total return. If a page doesn’t define it, keep digging.

  • Read the latest 19a. Persistent ROC while NAV trends down can signal an over-distributed fund; occasional ROC can be benign tax smoothing. FINRA explains the trade-offs.

  • Look at coverage for bond CEFs. Check NII coverage/UNII on sponsor materials and recognized trackers (e.g., CEFData). Don’t overreact to one month.

  • Compare rates on NAV vs. price. A high rate on price can just reflect a premium; rate on NAV shows the payout load on the portfolio. CEFConnect presents both alongside the distribution amount.

  • Mind ex-dates. Many CEFs pay monthly; the rate moves if price moves even when the dollar payout is unchanged. Confirm dates on the sponsor’s distribution page or a major calendar.

Today’s quick examples (prices as of late morning ET, Sep 2, 2025)

Ticker (Fund)

Price

Recent Monthly

Annualized

Indicated “Rate”*

Coverage/Source Notes

Next ex-date (status)

PDI (PIMCO Dynamic Income)

$19.65

$0.2205

$2.646

13.47%

CEFData shows NII coverage ~67.6%, UNII -$0.15 (7/31/25).

TBD — last ex-date was Aug 11, 2025.

UTG (Reaves Utility Income)

$37.94

$0.20

$2.40

6.33%

Latest notice shows a mix of NII and realized gains.

TBD — see sponsor calendar.

EXG (EV Global Div. Eq. Inc.)

$8.93

$0.0657

$0.7884

8.83%

Managed distribution plan; EV warns not to confuse distributions with “yield.” Last ex-date Aug 15, 2025.

Next: TBD.

UTF (Cohen & Steers Infrastructure)

$26.66

$0.155

$1.86

6.98%

Regular income-focused program; August 19a shows ~45% NII for that month.

Sep 9, 2025 (posted).

NEA (Nuveen AMT-Free Quality Muni)

$11.00

$0.073

$0.876

7.96%

Nuveen page posts current distribution; review monthly notices for tax character.

Sep 12, 2025 (calendar).

*Indicated “rate” = recent monthly × 12 ÷ price. It’s a cash-flow gauge, not a pure income yield.

Risks to watch

Destructive ROC. If a fund routinely pays more than it earns, NAV can grind lower over time. That raises future risk and can set up an eventual cut. FINRA calls this out explicitly.

Leverage and rate moves. Many CEFs borrow to boost income; that amplifies both upside and drawdowns when markets or funding costs move. Review leverage levels and covenants on sponsor pages.

Discount/premium swings. Price can wander from NAV, adding a second source of volatility to your total return, independent of the payout.

Keep This Stock Ticker on Your Watchlist

They’re a private company, but Pacaso just reserved the Nasdaq ticker “$PCSO.”

No surprise the same firms that backed Uber, eBay, and Venmo already invested in Pacaso. What is unique is Pacaso is giving the same opportunity to everyday investors. And 10,000+ people have already joined them.

Created a former Zillow exec who sold his first venture for $120M, Pacaso brings co-ownership to the $1.3T vacation home industry.

They’ve generated $1B+ worth of luxury home transactions across 2,000+ owners. That’s good for more than $110M in gross profit since inception, including 41% YoY growth last year alone.

And you can join them today for just $2.90/share. But don’t wait too long. Invest in Pacaso before the opportunity ends September 18.

Paid advertisement for Pacaso’s Regulation A offering. Read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals.

How to use this

  • Translate the label. When you see “9%,” ask: distribution rate on price or something else? If it’s rate-on-price, also check rate-on-NAV.

  • Read the 19a before committing. Favor funds whose mix is mostly NII and/or realized gains over time, with NAV reasonably stable.

  • Cross-check coverage for credit funds (PDI/PDO, etc.). A multi-month average above ~100% is sturdier than a one-off spike.

  • Confirm timing. Build your cash-flow calendar from sponsor notices; don’t assume last month’s ex-date repeats to the day.

Dividend changes in the last few days (ET)

  • Phillips Edison (PECO) — raised its monthly distribution 5.7% to $0.1083 per share (annualized $1.30). Declared Sep 2, 2025; record Sep 15; pay Oct 1.

  • Universal Safety Products (USPI) — one-time special dividend of $1.00 per share. Declared Sep 2, 2025; record and pay dates per release.

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.