UPDATE: Bank of America Initiates Coverage on BlackRock MuniHoldings NY Quality Fund with Underperform Rating on Dividend Risk

In a report published Monday, Bank of America analyst Elias Lanik initiated coverage on BlackRock MuniHoldings NY Quality Fund MHN with an Underperform rating. In the report, Lanik noted, “We rate MHN Underperform due to a dividend that may be at risk for a reduction over the next 12 months. Based on current earnings, MHN is under-earning its dividend level by about $0.06 and has roughly $0.12 of UNII. Accounting for the fact that 15% of the portfolio of the fund is callable over the next 12 months, we estimate that MHN could burn through most of its UNII over the next 12 months if the dividend is not reduced. MHN is currently trading at a premium of 2.9%, which is an appropriate valuation for the fund relative to peers, in our opinion, given an earnings yield of about 5.6%.” BlackRock MuniHoldings NY Quality Fund closed on Friday at $15.78.