Why MMU's 6.57% Monthly Dividend is a Secure Bet in 2025

The hunt for reliable income in 2025 is getting harder as interest rates stabilize and bond yields remain constrained. Enter Western Asset Managed Municipals Fund (MMU), a closed-end fund offering a 6.57% dividend yield with a $0.65 annual payout that’s been consistent for two straight years. With its May 22 ex-dividend date looming, here’s why income investors should act now to lock in this high-yield opportunity—and why the risks are lower than you might think.

Dividend Sustainability: A 12-Month Track Record You Can Trust

MMU’s dividend history is unambiguous: it has paid $0.65 per share annually since 2023, with no cuts or fluctuations. This consistency stems from its portfolio of investment-grade municipal bonds, which carry minimal default risk. Over 88% of its holdings are rated AAA or AA, and its average maturity of 10.1 years (as of late 2024) ensures steady cash flows.

The fund’s leverage ratio of 32%—a common feature in closed-end funds—hasn’t disrupted its payout. While leverage can amplify losses in stressed markets, MMU’s focus on high-quality bonds and its 33-year track record suggest this risk is manageable.

Risk-Adjusted Income: Outperforming Peers in a Rising Rate World

MMU’s 6.57% yield dwarfs broader municipal bond ETFs like the iShares National Muni Bond ETF (MUB), which yields just 3.11%, and the SPDR Nuveen Municipal Bond ETF (TUZ) at 4.75%. Even after accounting for MMU’s higher 1.31% expense ratio (vs. 0.05% for MUB), the yield gap is so wide it’s hard to ignore.

Critics might argue the expense ratio is steep, but here’s why it’s justified:
- Tax Efficiency: Municipal bonds are exempt from federal taxes, and often state taxes too.
- Duration Advantage: MMU’s average bond coupon of 4.89% (as of late 2024) creates a buffer against rising rates.
- Credit Quality: Unlike junk bond funds, MMU avoids speculative-grade debt entirely, keeping defaults near zero.

Tactical Timing: Act Before May 22 to Lock in the June Payout

The ex-dividend date on May 22 is a critical deadline. To receive the June dividend, investors must own shares before this date. Historical data shows MMU’s price typically recovers within 2.5 days post-ex-date, minimizing the risk of holding it short-term.

For dividend-capture strategies, this creates a low-risk window:
1. Buy MMU shares before May 22.
2. Hold until the dividend is paid (typically a few days later).
3. Sell to avoid longer-term volatility.

Stress Test: Can MMU Survive Rising Rates?

The Federal Reserve’s pause on rate hikes has eased near-term pressure, but long-term yields remain volatile. MMU’s duration of 6.03 years (effective) suggests moderate interest rate sensitivity. However, its closed-end fund structure allows it to use leverage and optimize its portfolio in ways ETFs can’t.

The bigger threat? Credit risk. But with 0% of its portfolio in BBB-or-lower bonds, MMU’s default risk is negligible. Even the most troubled states like Illinois (9.3% of portfolio) are rated AA- or higher, a stark contrast to riskier corporate bonds.

Final Verdict: A Rare Income Play with a 2% Price Catalyst

At a $10.00 share price, MMU trades at a 10.4% discount to its net asset value (NAV), offering a margin of safety. Pair this with its 6.57% yield and the upcoming ex-dividend date, and the case for buying now is clear.

Action Items for Investors:
- Buy MMU shares by May 22 to secure the June dividend.
- Hold for the long term to benefit from consistent payouts and potential NAV convergence.
- Compare to MUB and TUZ: While cheaper, their yields are half of MMU’s, making them less attractive for income seekers.

In a world of meager returns, MMU’s blend of safety, yield, and tactical timing makes it a standout option. Don’t let this high-income train leave the station without you.

Note: Past performance does not guarantee future results. Always conduct your own research or consult a financial advisor.