Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

December 29, 2010 - Nuveen Municipal Value Fund (NUV-NYSE) is a closed-ended fixed income mutual fund launched by Nuveen Investments, Inc. The fund is managed by Nuveen Asset Management. It invests in the fixed income markets of the United States. The fund also invests some portion of its portfolio in derivative instruments.

You may have seen the television report on municipal bonds. It was scary. With all the unfunded pension liabilities that most cities, counties and states carry, the possibility of default on municipal bonds has never been higher. Having said that, if you want tax free income (watch for the Alternative Minimum Tax on this income if it's your only source), then muni bonds are one of the few ways to get it. What's an investor to do?

Look at a closed end mutual fund like Nuveen. It gives professional management and just as important, great diversification. If you're too worried about municipal bankruptcies, then this idea isn't for you. But if you think politicians will somehow muddle through, then keep reading.

This fund gave investors a total return of 8% last year with capital gains and dividends. It finished its year (in October) with a price of $9.82. But since then, the price has slid as worries about the health of municipalities dominate financial concerns. After all, with high unemployment, a slow economy, and lower housing prices, tax revenues decreased markedly over the last 3 years. Without those revenues, it gets harder and harder to pay all the benefits promised to public workers. Something has to give.

On the other hand, the economy is starting to pick up. And Republicans are now in control of the House with an eye on cutting costs. The economy is showing real signs of recovery (employment is getting better). There are still budget allocations from the Federal government to states and counties so those funds will most likely help municipalities meet some of their obligations.

So with all the turmoil of the last several years, how has this fund performed? It's held up very well, trading in a range of $7.10 to $10.70. The almost level price tells investors that the fund managers are preserving capital and paying a dividend that is reliable. For the last 6 years, the pay out was 47 cents annually. Currently that gives a yield of 5.2%. Remember that's tax free. The dividend for 2011 is predicted to be 49 cents.

More numbers: Market Cap $1.81 billion. Price to Net Asset Value is .95.
Net Asset Value is $9.70. Beta is .13. The fund is down 5.65% in the last 52 weeks. There are 197.38 million shares outstanding.

There are other funds, both open and closed, that specialize in municipal securities. This is one that shows a solid track record with good management. If you're looking for tax free income, then learning more about NUV will be of interest.

- Company Web site: www.nuveen.com

- Ted Allrich