LMP Capital & Income Stock Price, News & Analysis

LMP Capital and Income Fund Inc. (NYSE: SCD) is a non-diversified, closed-end management investment company. According to available information, the Fund’s stated investment objective is total return with an emphasis on income. It is classified in the finance and insurance sector and is associated with the securities and commodity exchanges industry.

The Fund invests in a broad range of equity and fixed-income securities of both U.S. and foreign issuers. Its long-term holdings, as described in prior disclosures, include common stocks, convertible preferred stocks, interests in underlying funds and master limited partnerships. This mix of asset types is used in pursuit of total return while placing particular attention on generating income for shareholders.

Investment objective and strategy

The Fund’s objective of total return with an emphasis on income means it seeks to combine capital appreciation and income generation. The Fund’s portfolio includes equity and fixed-income securities and may gain exposure through underlying funds and master limited partnerships. The Fund has indicated that it is actively managed, with investment decisions made by Franklin Templeton affiliates and specialist managers referenced in its public communications.

According to multiple distribution notices issued pursuant to Section 19(a) of the Investment Company Act of 1940, the Fund uses a managed distribution policy. Under this policy, the Fund declares regular monthly distributions at a fixed rate per common share. These distributions may be funded from net investment income, net realized capital gains, return of capital, or a combination of these sources. The Fund repeatedly notes that shareholders should not draw conclusions about investment performance solely from the amount or character of current distributions.

Managed distribution policy

The Fund explains that its managed distribution policy is intended to deliver its long-term total return potential through regular monthly distributions. In its notices, the Fund provides estimates of the sources of each monthly distribution and cumulative allocations for the fiscal year-to-date. These estimates break out net investment income, net realized short-term capital gains, net realized long-term capital gains and return of capital on a per-share basis and as percentages of the total distribution.

The Fund also states that when aggregate net investment income and net realized capital gains are less than the distribution level, the difference is distributed from the Fund’s assets and constitutes a return of the shareholder’s capital. It emphasizes that a return of capital does not necessarily reflect investment performance and should not be confused with yield or income. The Fund further notes that a return of capital is not taxable but reduces a shareholder’s tax basis in their shares for federal income tax purposes.

Use of rights offerings

In its public announcements, LMP Capital and Income Fund Inc. describes the use of transferable rights offerings as a way to raise additional capital. The Fund’s Board of Directors has authorized a rights offering in which existing stockholders receive rights to subscribe for additional shares of common stock. Each stockholder receives one right for each share held on a specified record date, and a set number of rights plus a subscription price are required to purchase one additional share.

The Fund has stated that its adviser and subadvisers believe such an offering may benefit the Fund and its stockholders by increasing the Fund’s assets. According to these communications, additional assets can provide more capital for pursuing the Fund’s investment objective and may affect the Fund’s expense ratio by spreading fixed costs over a larger asset base. The Fund also notes that additional shares of common stock issued in an offering could affect the liquidity of the Fund’s shares on the New York Stock Exchange.

Trading and structure

LMP Capital and Income Fund Inc. is listed on the New York Stock Exchange under the ticker symbol SCD. As a closed-end fund, its shares trade in the secondary market and may trade at a discount or premium to net asset value. The Fund’s public communications highlight that the market price of its shares is influenced by factors beyond the Fund’s control and that shares of closed-end investment companies frequently trade at a discount from net asset value.

The Fund is subject to the Investment Company Act of 1940 and issues periodic notices under Section 19(a) when distributions may include sources other than net investment income. It also references registration statements and prospectus supplements filed with the Securities and Exchange Commission in connection with rights offerings. These documents provide additional detail on the Fund’s investment objectives, risks, charges and expenses.

Performance and distribution metrics

In its distribution notices, the Fund reports several metrics related to performance and distributions, including average annual total return in relation to net asset value over a five-year period, an annualized distribution rate as a percentage of net asset value, cumulative total return over a fiscal period, and a cumulative fiscal year-to-date distribution rate as a percentage of net asset value. The Fund explains that average annual total return represents the compound average of annual net asset value total returns, assuming reinvestment of distributions. It also notes that cumulative total return reflects the percentage change in net asset value over a defined fiscal period, again assuming reinvestment of distributions.

The Fund clarifies that the amounts and sources of distributions reported in its Section 19(a) notices are estimates and not intended for tax reporting. Actual tax characterizations depend on the Fund’s investment experience over the full fiscal year and may change based on tax regulations. Shareholders receive a Form 1099-DIV for the calendar year that describes how to report the Fund’s distributions for federal income tax purposes.

Advisers and management

Public communications about LMP Capital and Income Fund Inc. identify Franklin Templeton Fund Adviser, LLC as an adviser and refer to ClearBridge Investments, LLC, Western Asset Management Company, LLC and Western Asset Management Company Limited as entities involved with the Fund’s investments. ClearBridge is described as overseeing the Fund’s allocation between equity and fixed-income securities and being responsible for the Fund’s equity investments. Western Asset Management entities are described as subadvisers. These firms are indirect wholly owned subsidiaries of Franklin Resources, Inc., which operates under the Franklin Templeton name.

The Fund notes that it is actively managed and that there is no guarantee that investment decisions by these advisers and subadvisers will produce desired results. It also emphasizes that all investments involve risks, including possible loss of principal, and directs interested parties to its current reports and shareholder reports for more detailed discussions of strategies and risks.

Role within the investment management ecosystem

LMP Capital and Income Fund Inc. is part of the broader Franklin Templeton organization, which describes itself as a global investment management group with specialist investment managers and capabilities in fixed income, equity, alternatives and multi-asset approaches. Within this context, SCD functions as a closed-end fund vehicle through which investors can access a managed portfolio of equity and fixed-income securities with a stated focus on total return and income. The Fund’s frequent distribution-related communications, managed distribution policy and use of rights offerings are central features of how it operates as an exchange-traded closed-end fund.