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At the end of each month, I deploy extra cash received from dividends and distributions. My goal is to focus upon closed end funds (CEFs) which are trading at a 10% discount to NAV, offer a 10% yield, and pay monthly dividends.

My mindset prefers the monthly dividend versus the quarterly dividend. Quarterly dividends require strategic portfolio planning. Monthly dividends are there every month - and there is a certain level of comfort in that! This helps with budgeting new equity positions, adding to existing positions, and provides a steady cash flow. The 10% discount to NAV has been difficult to come by in recent months. Today I researched 5 global equity closed end funds, and I purchased two new names for my portfolio.

My findings are as follows:

Alpine Total Dynamic Dividend (NYSE:AOD)

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  • Price per Share: $6.21
  • Net Asset Value (NAV) XAODX: $6.48
  • Discount to NAV: 4.2%
  • Leverage: 11.14%
  • Annual Expense Ratio: 1.54%
  • Market Cap: $1.6-Billion
  • Monthly Dividend: 5.5-cents per share
  • Annual Dividend Payout: 66-cents per share
  • Annual Dividend Yield: 10.6%
AOD offers a compelling valuation. The $1.6-billion CEF pays a monthly 5.5-cents per share distribution. The annual dividend, 66-cents per share, offers a 10.6% yield based upon a present $6.21 price per share. The fund is trading at a reasonably attractive 4.2% discount to NAV. AOD is a CEF I want to own at current prices.

The CEF trades at a very reasonable 11% leverage. The operating expenses are fairly high at 1.54%. A $1.6-billion CEF should have lower operating expenses.

I am long AOD as of today. Investors should be aware of this fund's prior dividend cuts. Reviewing the equity holdings provides a certain degree of comfort based upon the current market landscape and the fund's distribution levels.


Alpine Global Dynamic Dividend Fund (NYSE:AGD)

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  • Price per Share: $7.59
  • Net Asset Value (NAV) XAGDX: $7.41
  • Premium to NAV: 2.4%
  • Leverage: 2.58%
  • Annual Expense Ratio: 1.56%
  • Market Cap: $186-Million
  • Monthly Dividend: 6-cents per share
  • Annual Dividend Payout: 72-cents per share
  • Annual Dividend Yield: 9.48%
Reading the AGD annual report, I liked what I read. I anticipate AGD will be a potential holding in the future. I decided off purchasing any shares due to the premium to NAV. The yield is very tasty at a 9.48% level and the leverage is extremely low at 2.58%. Alpine's CEFs had troubles during the European currency crisis last year, and are really in a show-me mode. This smaller cap CEF, compared to its brother AOD, could be a tempting purchase if a discount to NAV presents itself.

Eaton Vance Tax Advantaged Global Dividend Income Fund (NYSE:ETG)
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  • Price per Share: $15.35
  • Net Asset Value (NAV) XETGX: $16.61
  • Discount to NAV: 7.6%
  • Leverage: 24.34%
  • Annual Expense Ratio: 1.51%
  • Market Cap: $1.6-Billion
  • Monthly Dividend: 10.25-cents per share
  • Annual Dividend Payout: $1.23-per share
  • Annual Dividend Yield: 8%

I analyzed the ETGs filings and reports. Today I bought a smaller position, compared to AOD, due to the overall fund's attractiveness. The fund pays a 8% annual yield and is trading at a 7.6% discount to NAV. The fund's holdings are primarily blue chip names. The leverage is a bit higher than I would like, at 24.24%, but the equity names are the bluest of the blue. Earning 8% annualized is acceptable.

ING Global Equity Dividend & Premium Opportunity Fund (NYSE:IGD)

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  • Price per Share: $11.41
  • Net Asset Value (NAV) XIGDX: $11.43
  • Discount to NAV: n/a
  • Leverage: zero
  • Annual Expense Ratio: 1.03%
  • Market Cap: $1.1-Billion
  • Monthly Dividend: 10-cents per share
  • Return of Capital in Monthly Dividend: 3.6-cents per share
  • Annual Dividend Payout: $1.20-per share
  • Annual Dividend Yield: 10.52%
  • Annual Dividend per Share [minus return of capital]: 6.7%

The IGD CEF has a few issues which need to be highlighted. The fund does not use leverage and has an attractive expense ratio of 1.03%. The annual $1.20 dividend appears excellent on the surface. The distributions, however, include 36% return-of-capital. Adjusting for the return-of-capital, the yield is a less than compelling 6.7% annualized yield. This fund is a pass for now.

ING International High Dividend (NYSE:IID)

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  • Price per Share: $12.17
  • Net Asset Value (NAV) XIIDX: $11.44
  • Premium to NAV: 6.4%
  • Leverage: zero
  • Annual Expense Ratio: 1.26%
  • Market Cap: $94-million
  • Monthly Dividend: 9.2-cents per share
  • Annual Dividend Payout: $1.10-per share
  • Annual Dividend Yield: 9.0%
The net asset value is $11.30, and the CEF is trading at a 6% premium to NAV. I prefer to wait for CEFs to trade at a discount to NAV.

The IID CEF is non-leveraged, and the focus is on high-yield dividend stocks. In addition, income is earned through options. Option strategies includes selling covered call against their long common stock positions.

The fund's small size, $94-million, is worth noting. The liquidity in entering or exiting positions can be time consuming. I do like the lack of leverage and the yield is a favorable 9%. I will revisit this name when the CEF trades at NAV or a discount to NAV.
Disclosure: I am long AOD, ETG.
Source: 5 Global CEFs Paying Monthly Dividends