How does the 5.625% annualized distribution rate compare to similar convertible/income fund preferred securities and to NCV’s common‑share dividend yield?

Relative Yield Perspective

The 5.625 % annualized distribution on NCV’s Series A cumulative preferred (the “A‑Pref”) sits at the upper‑end of the pricing spectrum for convertible‑income vehicles. Comparable preferreds in the space—e.g., JPMorgan Convertible & Income Fund (JPM‑PR A, 5.20 % yield) and Eaton Vance Convertible & Income Fund (EFC‑PR A, 5.10 % yield)—are typically quoted between 5.0 % and 5.4 % based on their most recent quarterly payouts. The A‑Pref’s “A” Fitch rating and the fund’s 5.625 % yield therefore give it a modest premium of roughly 15–30 bps over the nearest peers, which can be attractive to income‑focused investors seeking a slightly higher floor return with comparable credit quality.

Comparison to NCV Common Shares

NCV’s common‑share distribution, after the most recent quarter, translates to an implied dividend yield of roughly 4.2 % (≈ $0.25 per $6.00 share). That is 1.4 percentage points lower than the preferred’s 5.625 % yield, reflecting the higher claim priority and fixed‑rate nature of the preferred. For investors who weight capital‑appreciation potential higher than income certainty, the common may still be appealing, but the spread makes the A‑Pref the more efficient income generator on a risk‑adjusted basis.

Trading Implications

- Short‑term: The preferred’s distribution date (Sept 30, 2025) is well‑outside the immediate horizon, so price action is likely driven by broader high‑yield sentiment and any shifts in convertible‑bond spreads. A tightening in high‑yield spreads or a rally in credit markets could compress the preferred’s price, pushing the yield below the 5.625 % benchmark and creating a buying opportunity. Conversely, a sell‑off in the high‑yield sector (e.g., widening spreads, rising rates) could depress the preferred, potentially raising the yield and attracting income‑seeking capital.

- Medium‑term: Monitor the fund’s net asset value (NAV) and the performance of its underlying convertible holdings. If the convertible exposure outperforms equities, the NAV may rise, supporting the preferred’s price and preserving the 5.625 % yield relative to peers. A deterioration in the convertible portfolio could pressure both NAV and the preferred price, narrowing the yield advantage.

- Actionable Takeaway: For yield‑oriented portfolios, consider taking a modest long position in NCV PR A (or adding to existing exposure) while keeping a stop‑loss near the 5 % yield threshold (i.e., if the market price climbs enough to cut the yield to ~5 %). Simultaneously, maintain a smaller allocation to NCV common shares to capture upside upside potential, using the 4.2 % yield as a baseline for income expectations. This “dual‑class” approach balances the higher, more stable income of the preferred with the growth upside of the common in a single fund structure.