For those of you unfamiliar with this series of articles, they're basically an approximate five-year profit and loss review of a number of Exchange-Traded Funds (ETFs) and Closed-End Funds (CEFs) that primarily invest in and, hopefully, profit from dividends earned from their investments in preferred securities, equities, or bonds, which they then distribute to shareholders.
This link will provide you the information necessary to fully appreciate and understand the following article, the differences inherent in CEFs and ETFs, and the remaining articles of this series. It will also serve to eliminate lots of reading redundancy for my regular readers.
This report concerns the Western Asset Mortgage Defined Opportunity Fund (DMO), hence the following description taken from a QuantumOnline screenshot:
This CEF's fees and costs are average, management fees total 1.47%, plus unnamed expenses of approximately 0.15% and interest costs are 0.53%. Consequently, its total cost average is 2.15%. Transaction costs include commissions when securities are bought or sold and any applicable taxes if held in a taxable account. The more active the trading account, the higher these fees. From my research thus far, this appears to be standard operating procedure for funds such as this.
The inception date of this fund was 2/24/10, at which time, inception price was $20.00/share and NAV $19.06. As I write, its share price is $24.23 and its NAV is $21.92, which translates to a premium of 10.54%. However, over this past year, it has traded at an average premium of 5.22%, which indicates to me that this fund appears to be highly regarded by most savvy fund investors, evidenced by the consistent premium it trades at. Furthermore, this is one of the few, if any, funds I have reviewed that currently trades above its inception price and NAV. Kudos.
From the following list of its top 10 holdings, it's apparent that this fund primarily invests in bank asset-backed bonds, all based in the United States, and all below investment grade.
The following screenshot is provided by CEFConnect:
Its share price performance over the past five years has certainly performed well as shown in the following screenshot provided by a Yahoo Finance Interactive Chart:
The chart displays DMO's performance over the past five years. Beginning on 9/17/11, it traded at $20.21 and is currently trading at $24.23, a great gain of $4.02.
According to the Preferred Channel's DRIP calculator, which also includes an unDRIP'd calculation:
Over the past almost five years, DMO has distributed dividends totaling $14.32, which worked out to an average yearly return of 13.61% unDRIP'd. DRIP'd returns were better, working out to a yearly average yield of 16.86%, which indicates that the DRIP'd shares were acquired advantageously. Their respective ending investment worked out unDRIP'd, $18,920.43, DRIP'd $21,784.32. This appears to be one terrific fund I'd be proud to have owned.
Distribution history from inception as shown by CEFConnect:
This fund, as I review it, gets better and better as do its yearly distributions. This fund has turned out to be a magnificent investment that has restored my faith in funds. Too bad more haven't performed this well.
For those of you interested in adding this fund to your portfolio, at $24.23, you will be buying it at a premium of 10.54%, above its $21.92 NAV. However, you might want to wait because over the past year, this fund has traded at an average premium of 5.22%.
However, this is a leveraged fund that might be impacted by a Fed interest rate increase.
The following is the list of funds I have and will investigate to give you a clear picture how each has performed over the past five years. Initially, I had decided to judge each over the entire life of the fund, but was dissuaded by a number of followers who advised that the results would be unfairly skewed by the recessionary contraction of 2008-09. Here's that list of funds, which has grown considerably as a result of additions you requested:
iShares U.S. Preferred Stock (NYSEARCA:PFF), PowerShares Preferred Portfolio ETF (NYSEARCA:PGX), Global X SuperIncome Preferred ETF (NYSEARCA:SPFF), PowerShares Financial Preferred Portfolio (NYSEARCA:PGF), VanEck Vectors Preferred Securities ex Financials (NYSEARCA:PFXF), SPDR Wells Fargo Preferred Stock ETF (NYSEARCA:PSK), PowerShares Variable Rate Preferred Portfolio (NYSEARCA:VRP), iShares International Preferred Stock ETF (NYSEARCA:IPFF), John Hancock Preferred Income Fund II (NYSE:HPF), First Trust Preferred Securities and Income ETF (NYSEARCA:FPE), Flaherty&Crumrine/Claymore Total Return Fund (NYSE:FLC), Flaherty&Crumrine/Claymore Preferred Securities Income Fund (NYSE:FFC), Flaherty & Crumrine Dynamic Preferred and Income Fund, Inc. (NYSE:DFP), Flaherty&Crumrine Preferred Income Opportunity Fund (NYSE:PFO), John Hancock Preferred Income Fund III (NYSE:HPS), Nuveen Preferred Income Opportunities Fund (NYSE:JPC), John Hancock Preferred Income Fund (NYSE:HPI), Clough Global Opportunities Fund (NYSEMKT:GLO), First Trust Strategic High Income Fund II (NYSE:FHY), First Trust High Income Long/Short Fund (FSD), Prudential Global Short Duration High Yield Fund (NYSE:GHY), ProShares UltraShort S&P 500 (NYSEARCA:SDS), First Trust Intermediate Duration Preferred & Income Fund (NYSE:FPF), Cohen & Steers Select Preferred and Income Fund, Inc. (NYSE:PSF), Virtus Global Multi-Sector Income Fund (NYSE:VGI), DNP Select Income Fund (NYSE:DNP), John Hancock Premium Dividend Fund (NYSE:PDT), Cohen&Steers Infrastructure Fund (NYSE:UTF), Flaherty&Crumrine Preferred Income Fund (NYSE:PFD), Clough Global Equity Fund (NYSEMKT:GLQ), Clough Global Allocation Fund (NYSEMKT:GLV), Duff&Phelps Global Utility Income Fund (NYSE:DPG), Stone Harbor Emerging Markets Total Income Fund (NYSE:EDI), New America High Income Fund (NYSE:HYB), Invesco Credit Opportunities Fund (NYSE:VTA), Calamos Convertible Opportunities&Income Fund (CHI), Pimco Strategic Income Fund, BlackRock Utility&Infrastructure Trust (NYSE:BUI), Western Asset Mortgage Defined Opportunity Fund, PIMCO Dynamic Credit Income Fund (NYSE:PCI), Boulder Growth & Income Fund (NYSE:BIF), PIMCO Income Strategy Fund (NYSE:PFL), and NexPoint Credit Strategies Fund (NYSE:NHF).
Below is a screenshot taken from my IB platform that I populated to keep you apprised of the order of my reviews, and as a bonus, the funds' prices at the close 9/16/16.
Notice, the 2015 dividends are placed just to the right of the fund symbols. To the right of that are the trade prices as indicated on the above date. Of further interest, at the far right of the screen, are the prices of the 13-week highs and lows of each fund.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This series of articles primarily focuses on the past five year performance of each ETF and/or CEF reviewed strictly from profit or loss perspective, which is designed as a platform, or a setting of the table, for the reader to add his or her thoughts, knowledge, and information to the conversation.