Joe Eqcome

Are ETFs and CEFs Good for Dividend Investing?

starvin sargent

Thanks for your comments.

My sector allocation is the product of the industry model I developed and is based on adjusted historical performance of fund types during different phases of the economic cycle. In late/early economic phases, the fixed income does well as typically interest rates decline. This is usually followed by a rotation through the equity fund types. Of course each cycle is different. During the current cycle, credit issues became a impediment to the fixed income fund types initial advance. This was particularly true of the preferred fund typds

As it relates to the CEF analytical process, the investment algorithm I use is order of importance is: 1) Consistent high returns on NAV; 2) Abnormally large discounts for NAV (price, historical average, fund or sector type); 3) fund type or sector momentum (relative strength); 4) reasonable and sustainable distribution policy (investment income as a percent of distribution); 5) reasonable expense ratio; 6) insider ownership; 7) asset size and trading liquidity. That is the criteria for the ratings.

I hope this is helpful.

Joe Eqcome



On May 09 09:21 AM starvin sargent wrote:

> Hey Joe, Why BLV? Have you considered other CEF bond funds? Are their
> any that meet your criteria? For me something like FOF where there
> are so many funds bundled together to spread risk or HTR that uses
> leverage on a bond portfolio seem to have more potential. Also TYG
> that captures the divys from energy is good for that steady inflation
> protected return. Although with all CEF's deleveraging HF's will
> drive the share price very badly, just look at ETO or FOF for that!
> Finally please write up your allocation to these instuments and sell
> and buy rules, thansk for your work

Are ETFs and CEFs Good for Dividend Investing?

Steve20423

I maintain a website that focuses on CEFs that's free to interested investors. Additionally, there is a page on the website with links to other CEF related investor information. joeeqcome.web.officeli...

I hope you find this helpful.

Joe Eqcome

On May 08 08:47 AM Steve20423 wrote:

> I'm curious about your due diligence when selecting these funds up
> front.
> I don't disagree with your conclusion but it appears you were speculating
> on most of them to be something their not.
> A simple look at their history of payments indicates they are inconsistent.
> You can't really beat the index of your goal is to emulate it. I
> think purchasing a CEF is a good alternative if they actively manage
> to achieve their goal. But then you need to purchase at a deep discount
> to the market. When so doing there is less downside(in theory). I
> am sure you could have better choices if the goals and management
> of the funds were more in line with your own goals. I would like
> to know where to find more detailed analysis of CEF's If anyone can
> offer some websites or newsletters I would be grateful.
>

Are ETFs and CEFs Good for Dividend Investing?

Dividends4Life

Thank you for you observations. I like many of the other respondents agree that dividend investing is more than picking stocks with high yields.

However, your observation that there is greater dividend volatility in both CEF and ETFs than individual stocks seems to be a tautology, i.e., true by definition.

RICs, such as CEFs and ETFs, are legally bound to distribute their income and capital gains on an annual basis. As a consequence, such entities, by their very nature, would have distributions that fluctuate with stock market and the CEF managers' decision to harvest their capital gains. Operating companies are under no such distribution requirement and the dividends as a percentage of net income has averaged 50% to 60%. This has provided operating companies much more flexibility maintaining dividends in times of economic stress.

Much of your investment period (the late ‘70s) has been disappointing for shareholders and was reflected in the distribution of the CEFs. So, I'm not surprised with your results.

Lastly, what you may want to focus on is the composition of the dividend. The key is to find CEFs that continue to pay consistent amounts from net investment income which is more of a recurring source of distribution.

Joe Eqcome