UPDATE: Bank of America Initiates Coverage on Nuveen NY Dividend Advantage Municipal Fund with Underperform Rating on Dividend Risk

In a report published Monday, Bank of America analyst Elias Lanik initiated coverage on Nuveen NY Dividend Advantage Municipal Fund

with an Underperform rating. In the report, Lanik noted, “We rate NAN Underperform due to a dividend that may be at risk for a reduction over the next 12 months. Based on current earnings, NAN is under-earning its dividend by about $0.05 and has only roughly $0.06 of UNII. Accounting for a large portion of the portfolio of the fund being callable over the next 12 months (17%), we estimate that NAN is likely to burn through all of its UNII over the next 12 months if the dividend is not reduced. While the nearly 5% discount at which the fund is currently trading may at first glance appear attractive, we believe that this is an appropriate valuation for the fund relative to peers, given a low earnings yield of about 4.5%.” Nuveen NY Dividend Advantage Municipal Fund closed on Friday at $15.07.