Annualized Distribution 6.0%: Both Adams Express Company (ADX) and Petroleum & Resources Corporation (PEO) will raise their 4th quarter dividends (in November) in order to achieve annualized distribution yields of 6.0%.
4th Quarter Distributions: For the first three quarters of this fiscal year, both ADX and PEO have paid distributions of $0.05 and $0.10, respectively, keeping their rates much lower than their annualized 6.0% yields. Based on historical 4th quarters data, we expect these dividend announcements to occur somewhere around 11/8/13, with ex-dividend dates of 11/14/13 and payment dates of 12/27/13.
Distributions Paid in the 4th Quarters: For these 4th quarter distributions, ADX and PEO will utilize total dividends, capital gains and a return of capital to "push" the aggregate annual distribution yields to 6.0%. The chart below shows the distribution sources for each company's quarter distributions between 2008 and 2012. (Both short-term and long-term capital gains)
Distributions for ADX and PEO 2008 to 2012
Dividends Will Be 6.0%: Although each company has typically boosted its 4th quarter dividends in the past, it wasn't until 2012 when each company put a 6.0% distribution yield into effect. ADX and PEO made these announcements on Sept. 8th and Sept. 13th of 2012, respectively. These announcements stated that each company's 4th quarter dividend would be based on the average price for the 12 months ending October 31 of the current year.
Top 10 Rankings ADX & PEO: The chart below shows important data relating to each company's top 10 holdings. ADX make up 25.1% and PEO make up 56.3% of net assets, respectively [("A") on Secondary Chart]. These Top 10 holdings have provided strong YTD price returns for each company ("B"): 19.1% for ADX and 30.4% for PEO.
Share Price and NAV: ADX's share price and NAV have risen 21.6% and 20.9%, respectively ("C"). PEO's share price and NAV have risen 17.9% and 19.6% ("C"), respectively.
The PrcNAVSprd for ADX went up by 0.7% YTD ("D"). PEO's PrcNAVSprd has gone down by -1.7% YTD ("D"). (A rise in PrcNAVSprd may be a negative issue of the stock price.)
Additionally, PEO's discount is currently 15.3% to where it has crept up from 14.1% on December 31, 2012 (-1.2%) ("F"). However, ADX's discount is currently 14.3%, not far from its discount of 14.8% on December 31, 2012 (+0.5%) ("F").
Little Change in November: As to be expected, each company's stock price takes these elevated 4th quarter distributions into account by adjusting their stock price significantly downward after their ex-dividend date. Over the past 5 years, the average percentage price change from October 31st to November 30th evens out when taking the elevated distributions into account (0.3% for both ADX and PEO). See the chart below for details.
However, these large price dips could be avoided if ADX put a managed distribution into place. In addition, if ADX received exemption from Section 19(b), then it would be free to use its capital gains to make level distribution payments. This would be a smart move on the part of ADX as data shows the average discount for GenEqFnds with a managed distribution is 2.2% and those without is 17%. It's a simple choice.
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