Aberdeen Asia-Pacific Income Fund: Just the FAX, Ma'am

In the light of plunging US interest rates, it has become much more difficult for the older investor. I am speaking of people who are retired and are of the age in their investing life where they need a reasonable fixed rate of return without the volatility. It has become nearly impossible to get anything which yields over 2%.

There are securities with higher rates of returns such as Reits which have been toxic. Of course,there are many energy-related income trusts which have a great yield. But there is the coming change in the Canadian tax laws. Also their return is ultimately tied to the price of energy, which probably means some volatility in the price. Does an 80 year old really want the volatility?

One possible solution for a portion of their portfolio is the Aberdeen Asia-Pacific closed-end bond fund (FAX). Since 2005,the price of FAX has stayed in a fairly tight price range between 5 1/2 and 7 with most of the time spent between 6 and 6 1/2. The current yield is nearly 7%. Over the past 5 years,the total annualized return has been 11.4%. The fund has over 45% of its assets in Australian securities with an average maturity of 7.8 years. This may be a plus for FAX for two reasons. First, the US dollar may continue its decline and second, the commodities boom may also continue. So FAX may be a partial solution to the problem of getting a higher yield for your portfolio.

Disclosure: none

Comments

[d_teller:]

CanRoys can still be a long-term bargain: ATPWF (Atlantic Power) has income only from U.S. operations, and won't get a hit from CDN taxes.
Similarly, there are other non-depleting CanRoys, and REITS.

In addition, some of the CanRoys have a backlog of investment cost carry-forwards to offset taxes for 5-20 years...but if they convert to limited partnerships, they may not be suitable for tax-shelterd accounts, not because of any UBTI challenge, but because losses & return of capital have little or negagative value in e.g., any IRA where the payouts are taxed at marginal rates, or in the Roth's, where payouts aren't taxed.

I'm not arguing against your general comments re FAX. I hold it, and when its price dropped < 6.00, recently, bought another 200 shares.

2008 Mar 24 01:20 PM

[mythoughts:]

I remember when FAX came out at $10 per share. It was then called Australian Income fund and paid 10% dividend. So the 40% drop in price per share is hard to make up with it's 7% curent income.

2008 Mar 24 06:43 PM

[Tony Daltorio:]

You are talking about ancient history when Fax was at 10 in the early 90s.Since 1999 it has been rock-steady.

2008 Mar 30 05:25 PM

[R BINKELE:]

I THINK FAX IS GREAT. YOU GET 2% FROM A BANK AND MAYBE 1% WHEN THE FED'S KEEP LOWERING RATES. THE RISK REWARD IS WORTH IT UNDER THESE CIRCUMSTANCES. INFLATION IS GETING WORSE.

2008 Apr 05 01:25 AM

[R. Hart / B...:]

I agree that FAX is a great security, particularly for folks like myself who are semi-retired or approaching full retirement and cannot afford to watch your life's savings & investments go down the toilet. I've completely changed my investment strategy away from the more risky investments and I'm glad to have FAX in the mix. Every month while everyone else was headed deep south my portfolio stayed relatively stable and kept paying those steady dividends and gains that make them so attractive.

When I purchased FAX in Nov 2007, I also bought shares of the following securities that also seem less volitale and they pay the regular monthly dividends and gains that make a big difference. The following investments have literally kept me afloat and marching forward during these turbulent times: FAX, BWP, CHY, EHI, EOS, IGR, PCL, PFL & ZTR.

2008 Apr 07 10:58 PM

[User 182384:]

My daddy had this thing going way back, like 1998 or something (it was his first venture outside the US Treasuries market, and was called something like the Australia Bond Fund). it's been reliable in its dividends and has (miraculously - taking into account what has happened to other bond funds recently) held its own and keeps spitting out that 0.5% to 0.6% per month, year in & year out.

2008 Apr 23 02:29 PM