Stock Analysis & Valuation Nuveen Arizona Quality Municipal Income Fund (NAZ)

• Previous Close: $12.04
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)	9.78	-19
Graham-Dodd Method	17.95	49
Graham Formula	20.62	71

Strategic Investment Analysis

Company Overview

Nuveen Arizona Quality Municipal Income Fund (NYSE: NAZ) is a closed-end fixed income mutual fund managed by Nuveen Asset Management, LLC, focusing on tax-exempt municipal securities within Arizona. The fund primarily invests in high-quality municipal bonds (rated Baa/BBB or better) with an average maturity of 18.66 years, offering investors federal and Arizona state tax-exempt income. Benchmarking against the S&P Arizona Municipal Bond Index and S&P National Municipal Bond Index, NAZ employs a fundamental, bottom-up investment approach. With a market cap of ~$134M, the fund appeals to income-focused investors seeking stable returns in the municipal bond market. Operating in the Financial Services sector under Asset Management - Income, NAZ provides a niche exposure to Arizona's municipal debt landscape, benefiting from Nuveen’s expertise in tax-advantaged fixed income solutions. The fund, established in 1992, remains a key player in state-specific municipal bond strategies.

Investment Summary

NAZ presents a compelling option for tax-sensitive investors seeking Arizona municipal bond exposure, with a dividend yield of ~6.5% (based on a $0.87/share annual dividend and recent price). Its 0.61 beta suggests lower volatility relative to equities, aligning with conservative income strategies. However, risks include interest rate sensitivity (given the 18.66-year avg. maturity) and concentrated Arizona exposure, which may limit diversification. The fund’s $90.4M leverage (67.6% of market cap) amplifies returns but also risk. Positive net income ($6.49M) and operating cash flow ($4.61M) indicate stable coverage of distributions, though reliance on refinancing for leverage costs could pressure returns in a rising-rate environment.

Competitive Analysis

NAZ’s competitive edge lies in its specialized focus on Arizona municipal bonds, offering localized tax exemptions unmatched by national or multi-state funds. Nuveen’s scale and credit research capabilities enhance its ability to selectively invest in higher-quality Arizona issuers (Baa/BBB+). However, the fund’s narrow geographic mandate limits diversification compared to national municipal bond funds, exposing it to Arizona-specific fiscal risks. Its use of leverage (~68% of assets) boosts yields but introduces refinancing risks if rates rise. Competitors often provide broader state diversification or lower fees, but NAZ’s tax advantages for Arizona residents create a defensible niche. The fund’s 0.56 EPS and 6.5% yield are competitive within single-state municipal CEFs, though fee structures (not disclosed here) may impact net returns versus passive alternatives.

Major Competitors

• Nuveen AMT-Free Quality Municipal Income Fund (NEA): NEA offers broader national municipal exposure (vs. NAZ’s Arizona focus) with AMT-free income, appealing to investors seeking geographic diversification. Larger AUM provides economies of scale but lacks NAZ’s state-specific tax benefits for Arizona residents.
• BlackRock Taxable Municipal Bond Trust (BBN): BBN invests in taxable municipal bonds, sacrificing tax exemptions but offering higher yield potential and national diversification. BlackRock’s credit research competes with Nuveen’s, but BBN’s strategy targets a different investor base (those prioritizing yield over tax efficiency).
• Nuveen Arizona Quality Municipal Income Fund II (MZA): MZA is another Nuveen-managed Arizona-focused fund, potentially diluting NAZ’s uniqueness. Both share similar strategies, but differences in leverage, duration, or fee structures (if any) would determine relative attractiveness.