As we move into April, the month of March was good for investments. The S&P 500 was up 2.68% in March. There were numerous monthly dividend CEFs that surpassed the S&P 500 market return in March. The CEFs with the highest March price performance are listed below. However, investors should beware, as the best performing CEFs are not always what they seem to be. While the price performance chart shows that each of the discussed CEFs have beaten the S&P 500 year to date, these March winners should be avoided by investors.
Helios Advantage Income Fund (HAV), a taxable bond fund, was the highest performing CEF in March based on price performance. HAV had a March market price return of 6.07%. Currently, HAV is trading at $9.33, a 4.71% premium to NAV. HAV has an impressive 1-year NAV return of 14% and market price return of 32%, which indicates management has provided value to shareholders. Helios Advantage Income Fund, Inc. announced an increase to its monthly dividend from $0.06 to $0.0625 per share, payable on March 29, 2012 to stockholders of record on March 14, 2012. Based on the HAV price of $9.33 on March 1, 2012, the Fund's annualized dividend yield was 7.94%. The expenses are high, and you can invest in a better CEF in comparison to this fund.
Cornerstone Total Return Fund (CRF) defies investing rationale for CEFs. CRF had a distribution decrease of 12% in January 2012, but rallies for a 19% price increase year to date. CRF is now trading at a 22% premium to NAV. CRF had a 5.5% price return in March. Here is the investor rationale for buying this CEF; it has an annual distribution rate of 16.47% with dividends paid on a monthly basis. Investors have been lured into this CEF because it offers such a high yield. However, CRF had a NAV of $25.78 in 2003 and it is now at $5.76, a decrease of 78% over this period. CRF is just returning the investors money through distributions. Do not fall into this trap; avoid this fund.
CRF's sister fund, Cornerstone Strategic Value Fund (CLM), is managed in the same destructive manner. While CLM had a price return of 4.65% in March, it is not exactly creating shareholder value. CLM has a distribution yield of 16.9% and trades at a 22% premium to NAV. The NAV for CLM was $35.00 10 years ago, and it is currently at $6.41, an 82% decrease during this period. Again, the CEF should be avoided by investors.
Helios High Income (HIH) is a taxable bond fund with a 3.74% price return in the last month. Currently, HIH is trading at $8.76, a 3.3% premium to NAV. HIH has an annual distribution rate of 8.12%, with $0.06 paid on a monthly basis. HIH had a significant selloff during 2007 and 2008. The fund has never recovered from this downfall but has operated as a stable fund since. HIH has a 1-year NAV return of 15% and a 3-year NAV return of 35%. However, the expenses are high and you can invest in a better CEF in comparison to this fund.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.