Stock Analysis & Valuation Nuveen Variable Rate Preferred & Income Fund (NPFD)

• Previous Close: $19.42
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	205.52	958
Intrinsic value (DCF)	13.07	-33
Graham-Dodd Method	14.68	-24
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Nuveen Variable Rate Preferred & Income Fund (NYSE: NPFD) is a closed-end management investment company specializing in variable rate preferred securities and income-generating assets. Headquartered in Chicago, Illinois, the fund operates in the financial services sector, specifically within the asset management-income industry. NPFD aims to provide investors with high current income and capital appreciation potential by investing primarily in floating-rate preferred securities and other income-producing instruments. The fund's strategy leverages Nuveen's expertise in fixed-income and preferred securities, offering a diversified portfolio that mitigates interest rate risk through variable-rate exposure. With a market capitalization of approximately $451 million, NPFD is a notable player in the preferred securities space, appealing to income-focused investors seeking yield in a rising-rate environment. The fund's disciplined approach and Nuveen's strong institutional backing enhance its credibility in the competitive asset management landscape.

Investment Summary

Nuveen Variable Rate Preferred & Income Fund (NPFD) presents an attractive option for income-seeking investors, given its focus on variable-rate preferred securities, which offer protection against rising interest rates. The fund's net income of $65.4 million and diluted EPS of $2.71 reflect strong profitability, while its dividend yield (implied by a $2.01 dividend per share) enhances its appeal. However, investors should consider the fund's sensitivity to credit spreads and market volatility, as well as its relatively low cash position ($100,436). The absence of debt is a positive, but the fund's performance is closely tied to the broader fixed-income market. NPFD's beta of 0.743 suggests lower volatility compared to the broader market, making it a potentially stable income vehicle in a diversified portfolio.

Competitive Analysis

NPFD's competitive advantage lies in its specialized focus on variable-rate preferred securities, a niche that provides a hedge against interest rate fluctuations—a key differentiator in the income-focused asset management space. Nuveen's institutional expertise and scale allow the fund to access a broad range of high-quality preferred securities, enhancing portfolio diversification and risk management. Compared to peers, NPFD's zero debt and strong net income position it as a financially stable option. However, its small cash reserves could limit flexibility in volatile markets. The fund's closed-end structure may also lead to discounts or premiums to NAV, adding another layer of risk and opportunity. While NPFD competes with both open-end and closed-end income funds, its variable-rate focus sets it apart from traditional fixed-rate preferred securities funds, offering a unique value proposition in rising-rate environments.

Major Competitors

• iShares Preferred and Income Securities ETF (PFF): PFF is a larger, more liquid ETF offering exposure to preferred securities, including both fixed and variable-rate instruments. Its open-end structure provides daily liquidity, unlike NPFD's closed-end format. However, PFF lacks NPFD's exclusive focus on variable-rate securities, making it less effective in rising-rate scenarios.
• Invesco Preferred ETF (PGX): PGX is another broad preferred securities ETF with a mix of fixed and floating-rate exposures. It offers diversification but does not specialize in variable-rate securities like NPFD. PGX's lower expense ratio may appeal to cost-conscious investors, but its performance may lag in a rising-rate environment compared to NPFD.
• Nuveen Preferred & Income Opportunities Fund (JPS): JPS, also managed by Nuveen, is a closed-end fund with a broader mandate, including hybrid and capital securities. While it benefits from Nuveen's expertise, it lacks NPFD's concentrated variable-rate focus, potentially making it less attractive in a rising-rate climate.
• John Hancock Preferred Income Fund (HPI): HPI is a closed-end fund with a focus on high-yielding preferred securities. It competes with NPFD in the income space but has a heavier allocation to fixed-rate securities, which may underperform in rising-rate environments compared to NPFD's variable-rate strategy.