Income Investors: Have An Open Mind For Closed-End Funds [View article]
Stock, I am indeed familiar with UNII, it is a difficult metric to track and understand. It can give rise from a number of reasons and can be erratic, possibly fluctuating due to miscalculations by fund mgmt. or heavy distributions by companies in the portfolio at certain times of the year. But agreed a consistent high, negative UNII is a red flag.
I thought ROC was an easier, better method of flagging potential problems with a distribution, but I appreciate you bringing it to readers' attentions. I actually found an article on Mornngstar, which I consider well done which is a worthy read for those who want to learn more about the intricate nature of UNII analysis.http://bit.ly/IRxgmX
Dividend Streaks - Do They Really Matter? [View article]
Dave, great post. As someone who took a chance on GE when it was down in the dumps, I found JPM's announcement yesterday rather sobering. I assumed the Capital division had its act together and was beyond the stupidity of 3-4 years ago, but now I'm second guessing myself, not to the point of selling, but simply reevaluating. Good luck with your evaluation.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
john, you are correct and i see above that others inquired about the issue. With JMF and other MLP related CEFs, the distributions from the MLPs that the CEF owns are ROC, which basically passes through to shareholders.
When I received my 1099 this year, the JMF related distributions were indeed ROC, which is not a taxable component, and merely reduces the cost basis of the original investment.
So, yes, in this case the reported ROC is a normal CEF event.
REITs can also return a portion of their income as ROC, typically non-qualified dividend income and ROC. So sporadic instances of ROC in REIT-related CEFs may not be a troublesome issue either.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
wk... I think you are correct on the ROC issue. It's somewhat complex, and I thought beyond the scope of this article. It's why I said that ROC is not necessarily a bad thing, but something to understand and focus on when selecting a CEF.
And just as a discount is not an immediate reason to purchase a CEF, a premium is not an immediate reason to eliminate the fund from consideration. Although buying assets for clearly more than what they are worth is clearly a counterintuitive concept.
I have read Joe's work, he is one of the best here on SA.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Varan, on a cursory look, it appears to hold a lot of BBB/BB paper, which I consider the sweet spot of corporate debt right now. It trades at a discount, has a bit of leverage, and has its income covered organically. With the caveat that I didn't spend a lot of time researching it, I would consider it a decent offering.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
mid, thanks for your contribution to the discussion. I would agree on everything you wrote. I think AWP's mgmt. is taking concrete steps through share buyback to narrow the historically high discount, something most funds never do. Buying AWP because of the buyback could also result in a 2-4% price increase, it's impossible to predict. I think the basic fundamentals of the fund don't justify the current discount.
I agree with your statement that one should never buy on discount alone. But, taken into consideration with other factors, the discount can be a compelling catalyst.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Stox, not sure it's quite an apple to apple comparison, since I think RNP is primarily a domestic product, and AWP is higher on the risk/reward totem pole, but I happen to find Cohen and Steers, in general, somewhat shareholder unfriendly. I think the fees are high, the leverage is high.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Counter, thanks, and good to hear from you!... I think, in general, on a fund by fund basis you can find the nitty gritty of how the leverage is achieved by going to the specific fund's web site. I find knowing what the % of assets enough for my research, but it certainly can't hurt to know exactly how the fund is achieving the leverage.
I don't like highly leverage funds, and even though the industry seems to be moving away from riskier leveraging methods, I prefer to keep leverage levels low in the funds I own.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Lee, the option CEFs are an even more complex animal as you mention. Thanks for pointing out the ROC rule here.
Also, for those wanting a more in-depth lesson, I think Nuveen http://bit.ly/INX4vd has a tremendous educational library of CEF discussions, both written and video. It's worth a visit.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Mike, "good" is always in the eye of the beholder. A cursory look at IAF would indicate a managed distribution now being covered by ROC and a premium price. Australia may be considered a flight to quality by some, thus the premium.
On FAX, appears a somewhat conservatively managed bond product, but with a decent amount of leverage. I see no ROC on FAX, the distribution appears covered by income.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Thanks, La Marque...I agree with the hating to pay a premium. It's like going to a car lot and telling the salesperson, "yes, I'd like to pay 2% more for that Buick than what it's worth."
Income Investors: Have An Open Mind For Closed-End Funds [View article]
mjk, thanks for the comment..... i would agree that a "perpetual" discount does appear on some CEFs, usually poorly managed or high fee products. In other cases investors are able to take advantage of price inefficiencies where the discount does narrow. JMF and AWF over the past year traded at double digit discounts at one point, but now trade at mild premiums. I don't have any comparative data on ETFs, but sounds like the makings of a good comparison article!
Income Investors: Have An Open Mind For Closed-End Funds [View article]
I thought ROC was an easier, better method of flagging potential problems with a distribution, but I appreciate you bringing it to readers' attentions. I actually found an article on Mornngstar, which I consider well done which is a worthy read for those who want to learn more about the intricate nature of UNII analysis.http://bit.ly/IRxgmX
Dividend Streaks - Do They Really Matter? [View article]
Income Investors: Have An Open Mind For Closed-End Funds [View article]
When I received my 1099 this year, the JMF related distributions were indeed ROC, which is not a taxable component, and merely reduces the cost basis of the original investment.
So, yes, in this case the reported ROC is a normal CEF event.
REITs can also return a portion of their income as ROC, typically non-qualified dividend income and ROC. So sporadic instances of ROC in REIT-related CEFs may not be a troublesome issue either.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
And just as a discount is not an immediate reason to purchase a CEF, a premium is not an immediate reason to eliminate the fund from consideration. Although buying assets for clearly more than what they are worth is clearly a counterintuitive concept.
I have read Joe's work, he is one of the best here on SA.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Income Investors: Have An Open Mind For Closed-End Funds [View article]
I agree with your statement that one should never buy on discount alone. But, taken into consideration with other factors, the discount can be a compelling catalyst.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Income Investors: Have An Open Mind For Closed-End Funds [View article]
I don't like highly leverage funds, and even though the industry seems to be moving away from riskier leveraging methods, I prefer to keep leverage levels low in the funds I own.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Also, for those wanting a more in-depth lesson, I think Nuveen http://bit.ly/INX4vd has a tremendous educational library of CEF discussions, both written and video. It's worth a visit.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
On FAX, appears a somewhat conservatively managed bond product, but with a decent amount of leverage. I see no ROC on FAX, the distribution appears covered by income.
Income Investors: Have An Open Mind For Closed-End Funds [View article]
Income Investors: Have An Open Mind For Closed-End Funds [View article]