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drdata

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  • Retirees, This Is Not Your Father's Retirement Plan: Constructing The 2015 Fill-The-Gap Portfolio [View article]
    Bonds lack the liquidity of bond funds. Bond funds will regain value as their holdings near maturity. When their holdings mature, the fund can reinvest the principle in higher coupon bonds (assuming a rising rate environment). When rates rise the value of existing bonds goes down, regardless of who owns them. Looking at the value of individual bonds in your portfolio gives one a false sense of security. The price shown is the last traded price for that issue.......when could have been months or even years ago. It may not properly reflect the current value at all. And, as far as getting your principle back on an individual bond......probable, but certainly not guaranteed.

    I have nothing against holding individual bonds. I've done it myself. But, in order to do it properly, you must invest in quite a large number to achieve diversification. By doing so, you will have for all practical purposes, created your own bond fund. I ended up selling my individual bonds because I did not have the desire to manage that portion of my portfolio. Your mileage may vary.
    Dec 26, 2014. 08:43 AM | Likes Like |Link to Comment
  • Update: My Reaction To Annaly Capital's Dividend Announcement [View article]
    If it gets back to your entry price, you will have made quite a bit on the dividends. It will have done exactly what you should have expected. So, you will sell at that point because ??? Because it happened to go down in price between the time you bought it and the time you sold it. How dare it do that?
    Dec 21, 2014. 10:09 AM | 4 Likes Like |Link to Comment
  • Eaton Vance Tax-Managed Global Diversified Equity Income Fund declares $0.0813 distribution [View news story]
    It would have been more beneficial to have received this post earlier in the month. Having it arrive on the dividend pay date is not very helpful.
    Nov 28, 2014. 12:07 PM | 1 Like Like |Link to Comment
  • A 7.3% Income Stream You Likely Haven't Considered [View article]
    Preferred shares are NOT equity. They do not show up in the equity portion of the balance sheet. Owners do not have voting rights. They do, however, show in the liability section. They are subordinate to bonds. They are usually rated a bit lower than bonds issued by the same company for this reason. Look at it this way....they wouldn't have a "par value" if they were equity.

    That being said, JPS and its brother JPC are well managed preferred share funds. I own shares of each. They are steady income producers. I did not, and would not buy them for capital appreciation. They are interest rate driven, like bonds. Both JPS and JPC fell in price in 2013 during the "taper tantrum". They will do so again when interest rates rise. Depending on the situation at the time, such an event may present the investor with a buying opportunity.
    Nov 6, 2014. 05:22 PM | 7 Likes Like |Link to Comment
  • New Mountain Finance: BDC Risk Profiles [View article]
    In all fairness, NMFC has issued special dividends in 2012, 2013, and again this year. It can be confusing trying to figure it out. But in the end, it was a positive.
    Sep 3, 2014. 09:56 PM | Likes Like |Link to Comment
  • My High Dividend Yield Retirement Portfolio Delivers 8.8% Of Income For This Retiree [View article]
    "PSEC cuts it dividend by 75% in the crash."

    Where do you get that???? As a PSEC shareholder, I know that did not happen. Yes, there was a cut when they changed over from quarterly dividends to monthly, but it was nowhere near 75% reduction.
    Jul 24, 2014. 03:56 PM | 6 Likes Like |Link to Comment
  • Dividends Do Matter - Especially In Retirement [View article]
    I think it boils down to how much the retiree investor is willing to bet that the next bear market is only "average"......and, how long he/she can afford for it not to be "average".

    I think the answer for the DGI investor is "I'd rather not take that bet if I don't have to".
    Jul 18, 2014. 01:06 PM | 5 Likes Like |Link to Comment
  • Buy-Write CEFs Are An Alternative To An S&P 500 Dividend Fund [View article]
    In regard to DNI, I checked cefconnect and you are correct. DNI's NAV distribution is greater than it's NAV total return. I originally bought shares of DNI in 2011, and added more in 2012, and a few more in 2013. My average cost was $14.06. It now trades around $16 per share. In addition, during that time, DNI paid the same distribution every quarter, and I have collected over $6800. So, the NAV TR being less than the NAV distribution is a bit perplexing. I do see one thing that is different with DNI as compared to the other buy/write funds we have been discussing.....it has a managed distribution policy, which means it tries to distribute the same amount every time in spite of what may be "lumpy" income to the fund. It may be that what we are seeing is the lag between distributions given out and "lumpy" income received.

    Given my track record with the fund, I can only recommend it. I don't think it's a "buy" at this time. I am waiting for the market to cool off a bit before adding any additional shares. But, based on actual performance, I believe it is a good fund.
    Jul 16, 2014. 11:36 AM | Likes Like |Link to Comment
  • Obamacare And Part Time Jobs Growth [View article]
    I do taxes and I see people now working two or three jobs, as evidenced by their multiple W-2's, when they used to work only one job. Their employer's cut their hours back so they do not have to offer healthcare, so to make ends meet, they work multiple part-time jobs. Some even work for one corporation, but their time is split between three places, KFC, Pizza Hut, and Taco Hell. They receive separate paychecks and never work more than 30 hours in one week for any one "employer". If I'm not mistaken, people in these situations count as 3 workers on the surveys.
    Jul 12, 2014. 10:22 PM | 11 Likes Like |Link to Comment
  • Buy-Write CEFs Are An Alternative To An S&P 500 Dividend Fund [View article]
    For something similar to INB, but with monthly distributions, check ETW and IGD. Also, you might try the fund screener on cefconnect.com.

    Also, I should mention that Blackrock is changing several of their funds from quarterly to monthly distributions starting in the August/September time frame.
    Jul 12, 2014. 01:40 PM | Likes Like |Link to Comment
  • Buy-Write CEFs Are An Alternative To An S&P 500 Dividend Fund [View article]
    It should be pointed out that covered call funds do better in a flat or down market. Since they are selling calls, they are in effect capping gains.....no different from the individual selling calls on his/her own portfolio of individual stocks. Therefore, since we have had a strong bull market for the past couple of years, it should be little surprise that SDY has outperformed during that stretch in regard to capital gains. However, the trade-off is that covered call funds have much higher distributions. These funds are generally tax advantaged. The distributions will usually be a combination of qualified dividends, long term capital gains, and return of capital (ROC). Tax burden is therefore held to a minimum, so that these funds can be held in a regular brokerage account.

    If capital gains are desired, then SDY may be a more appropriate choice. However, the tax advantaged distributions are hard to pass up, so a combination of SDY and one or two covered call CEFs may be the way to go.

    Long EOS, ETV, ETB, ETY, EXG, INB, CII, IGD, and DNI which gets very little love on SA, but pays over 10%.......but, don't tell anyone. I don't want to spoil the party. :)
    Jul 12, 2014. 11:29 AM | 3 Likes Like |Link to Comment
  • How Much Money Are You Planning To Lose In Your Bond Portfolio? [View article]
    Normally in a bond fund, the bonds comprising the fund portfolio are laddered as to maturity date. So, some bonds will mature in 2015, some in 2016, and so forth. The fund manager may then use the proceeds to purchase new bonds for the fund at whatever maturity and quality the fund deals with.....short, intermediate, or long term. That's why a number of bond funds have cut their interest payments over the past 3 - 4 years. As portfolio bonds matured, the fund managers have had to purchase new bonds at lower coupon rates.

    Long term bonds usually fluctuate more in price with interest rate changes. So, there is more risk with long term bonds if you need to cash them in, or sell shares of your LT bond fund. However, the trade-off is that LT bonds pay better. You must weigh the probability that you will need to cash out the holding at some future date versus the increased reward obtained from the longer term holdings.
    Jul 11, 2014. 04:17 PM | 6 Likes Like |Link to Comment
  • How Much Money Are You Planning To Lose In Your Bond Portfolio? [View article]
    I really don't buy shares of bond funds for capital appreciation. I expect the shares to lose value in a rising rate environment, however I don't expect to lose money. I have no intention of selling. The bond funds lost value last Summer with the rate spike and the taper tantrum. That was a buying opportunity to add more shares at better yield for increased income. The coupon rates didn't change. The bond quality didn't change. And, the duration did not change. The only thing that changed was that new bonds were issued at higher coupon rates, driving down prices of existing bonds. But, the function of the existing bonds was not affected. They were, and still are, producing the same income as before. Only now, you don't have to pay as much to receive it. Thank you Mr. Market.

    As the bonds within the funds mature, they will be replaced with newer, higher coupon issues. The funds will slowly regain some of the value they lost. That's great and probably comforting to many. However, pointing at your holdings on the computer screen and remarking on their value.....whether up or down, won't pay the bills or provide dry powder for reinvestment. Only dividends will do that. So, bonds and other fixed income investments should be viewed with an eye toward their income sustainability. Market drops due to rising rates should become opportunities to add to the income stream. After all, the big detriment to bonds is that, unlike stock dividends, they do not increase their payout. They are therefore subject to inflation risk. An investor can combat that risk by buying additional shares, and what better time to do it.
    Jul 10, 2014. 11:55 PM | 12 Likes Like |Link to Comment
  • Just How Risky Is High-Yield Dividend Investing? [View article]
    Risk is the probability of not having the money you need, when you need it. It is also the failure to act appropriately in response to this requirement.
    Jul 4, 2014. 09:59 AM | 6 Likes Like |Link to Comment
  • How To Lower Or Even Eliminate Your Taxes On REITs [View article]
    Actually, despite all the critical comments, this strategy does work for capital gains. It doesn't really work very well for tax reduction, however. I would amend the strategy as follows:

    1. Buy only stocks that pay quarterly. Monthly payers don't drop as much in price.

    2. Buy about 3 - 4 weeks after the ex-date. There is usually an opportune moment to buy somewhere in that time frame, as many traders are buying on or shortly after the ex-date, so you want to let things settle down a bit first.

    3. Look for a price surge about a week before the ex-date and sell it then. You may be able to harvest way more than the dividend amount.

    4. If things don't go as planned, price-wise, you can always hold on and collect the dividend, and wait for the next quarterly go 'round.

    I do taxes. One of my clients employed this very strategy. He also used various technical indicators to assist. Out of approximately 50 trades, he had 1 loser. All others were winners. And, yes, there were a couple of times when he held the stock and collected the dividend before selling it later on. The only thing I didn't like was that he often traded MLP's. The strategy worked quite well for the MLP's, but for tax purposes there were multiple K-1 statements, as well as 1099-DIV and 1099-B statements. It made for a challenging tax return. :)
    Jun 26, 2014. 07:58 PM | 2 Likes Like |Link to Comment
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