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BDJ: Attractive ~6% Distribution Yield Paid Monthly


  • BDJ has provided investors with an attractive return this year due to discount reduction.
  • The fund pays an appealing ~6% distribution yield, while not the highest available, it is certainly sustainable.
  • Today the shares could be picked up for an initial position and remain attractively priced relative to the rest of the CEF space.
  • This idea was discussed in more depth with members of my private investing community, CEF/ETF Income Laboratory. Learn More »

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Written by Nick Ackerman, co-produced by Stanford Chemist

BlackRock Enhanced Equity Dividend Trust (NYSE:BDJ) is one fund that I have quite a large position in. The fund's share price was quite busy

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This article was written by

Nick Ackerman profile picture

Nick Ackerman is a former financial advisor using his experience to provide coverage on closed-end funds and exchange-traded funds. Nick has previously held Series 7 and Series 66 licenses and has been investing personally for over 14 years.

He contributes to the investing group CEF/ETF Income Laboratory along with leader Stanford Chemist, and Juan de la Hoz and Dividend Seeker. They help members benefit from income and arbitrage strategies in CEFs and ETFs by providing expert-level research. The service includes: managed portfolios targeting safe 8%+ yields, actionable income and arbitrage recommendations, in-depth analysis of CEFs and ETFs, and a friendly community of over a thousand members looking for the best income ideas. These are geared towards both active and passive investors. The vast majority of their holdings are also monthly-payers, which is great for faster compounding as well as smoothing income streams. Learn More.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of BDJ either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article was originally published to members of the CEF/ETF Income Laboratory on September 18th, 2021.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (40)

Own several BlackRock funds, but not BDJ. Putting it on my watch list-- thanks!
@jazznut Great fund. Right for the current environment. Cyclical and financial orientation. Light on big tech.
Nick Ackerman profile picture
@jazznut thank you for reading! Good luck with getting in.
Cuip99 profile picture
I have a small position in BDJ and have been quite satisfied with the yield. Thanks for the past recommendations. I may consider increasing my position with time.
Nick Ackerman profile picture
@Cuip99 thank you! Good luck with your investing!
Thanks for this article. You said:

"One of the things that are frequently the case with CEFs; they show attractive total returns due to high distributions while share price remains flat or goes down."

I think that's an important point that often gets lost, especially for newer investors. There are certainly higher performing exceptions (e.g. CII, EOS, ASG), but even with those funds you're still trading some potential capital gains for regular cash payments. That trade-off works fine for many people, including me. But it's a key difference between CEFs and most ETFs that bears repeating.
Nick Ackerman profile picture
@toromi agreed! Too many people simply look at a price chart to determine a good investment or not. That just doesn't always work when you have an income investment that pays everything out (and more sometimes!)
rickevantodd profile picture
Very good article. In a tax free account so I would consider it as a sell if something else more interesting materialized.
Nick Ackerman profile picture
@rickevantodd thank you for sharing. Good luck!
Income4ever aka Cyclenut profile picture
Good analysis Nick

Looks like according to M* 2021 distributions are all income compared to last 4 years ST and LT cap gains made up the bulk of its distribution.
What changed so dramatically?
I like BDJ and CII as well
Added PM to my portfolio last week during volatility dips
Nick Ackerman profile picture
@Income4ever aka Cyclenut I think that is a prime example of why you shouldn't put much credit in Morginstar data when it comes to distribution classifications. seekingalpha.com/...

If you go to the fund's website and check out the latest section 19a, you will see 44% estimated to be LTCG. As a reminder that is only an ESTIMATE itself. www.blackrock.com/...

By the time we see the official year-end tax classifications, I suspect we will see that amount similar to last year - where LTCG was roughly 75% of the distribution.
Income4ever aka Cyclenut profile picture
@Nick Ackerman
Your 1000% correct, I should know better and check additional sources as well.
Honestly SA dividend data is also not worth a grain of salt, especially BDC, Reits and Mlp dividend data.
I've brought it to their attention numerous x and nothing changes.
Nick Ackerman profile picture
@Income4ever aka Cyclenut indeed! Unfortunately, the best source to go to is the investment's website/investor relations. Whether that is a CEF, BDC, REIT or MLP. That is an extra step but data aggregators are really good for at least narrowing down some investment choices.

To be fair to Seeking Alpha, they have been doing better with correcting some data that contributors call attention to. Additionally, they get their information through a third-party provider as well. So it can take a while sometimes to get things corrected...sometimes it takes more than one time to reach out to them before it's fixed, which is the frustrating part. Anyway, that's probably way off topic!

The bottom line is that the most reliable data will come straight from the investment's website generally. Though I've seen small errors before. The tax breakdown last year from Eaton Vance had the wrong fund names provided for the tickers. Even they get confused by their names! hah! I reached out to them and they fixed it by the next day.
Good review of one of my core CEFs purchased last year. I hope they dump WF and AIG though. Lousy companies. Much better financial stocks than these losers. Hope they option them away. Otherwise it was a decent buy last year and I sweep the dividends. I prefer CII and have that one too.
Nick Ackerman profile picture
@jasonjones thank you for your thoughts! I think exiting WFC would be ideal after such a strong run. You never know when they'll announce the next regulatory body is investigating them for a scandal.
genesistt profile picture
Thanks to your writings, Nick, I am long into this one! You're a marvel! Tom
Nick Ackerman profile picture
@genesistt thank you for reading and the kind words!
aardvark3 profile picture
Check out GDV.
Nick Ackerman profile picture
@aardvark3 I'm long GDV. Thank you for the comment!
SleepyInSeattle profile picture
@aardvark3 Is it selling at a discount?
Nick Ackerman profile picture
For those interested, here was my previous coverage of GDV seekingalpha.com/...

It is discounted and looking like a fairly attractive buy. I actually picked up some last month, ironically. It is a leveraged fund and so I would view it as a bit more aggressive than BDJ, relatively speaking.
mbakewell profile picture
I’m new to CEF’s so I hope you can help me with this question. BDJ covers 26% of the distribution with NII and you indicate that the distribution is well covered in the first half of 2021 with capital gains. How can that be the case when CEF Connect shows no capital gains in 2021? If they are counting unrealized gains where does the cash come from to make the distribution?
Nick Ackerman profile picture
@mbakewell love the question here! One of the things that CEFConnect is trying to show is the tax character of the distribution. That ISN'T the fund's actual earnings. We only see that from their reports, or sometimes some fixed-income funds show a monthly UNII report.

That's the short answer. If you have the time, and the inclination, you can read an article on that topic that I've posted earlier this year. That would be my long answer. seekingalpha.com/...
craftbrewinfo profile picture
@Nick Ackerman I like this one too!
"I continue to remain optimistic about the financial sector" Although I consider it a financials fund ( the banks) it does have a nice mix of other holdings. But the financials is what got me to buy a few months ago when I opened a position. I think the interest rates WILL have to raise in the not so distant future, and when they do, I think Banks will start taking off.

Nick, let me ask a question- when you say this is a fund you have with a large position, how do you handle % allocations with your CEF's? Being relatively new to CEF's another reader on another post advised to not have any one CEF exceed 5% of your portfolio.

My current mix is about 70% Blue chip DGR type stocks, and 30% current income with CEF's. I do very much like the current income form the mopay CEF's to drip for more shares. I like the current income as a base to grow as I have a 10 year horizon when I will retire and take the income. I want to increase the % size of these quality CEF's, but that reader's comments stuck in my mind?
Nick Ackerman profile picture
@craftbrewinfo this is a great question! So everyone's answer will depend on their own situation, their risker tolerance, objectives etc...There is no one answer to fit all. Though I'm more than happy to share my approach

CEFs make up anywhere from 60 to 70% of my assets over the last few years. This has been reduced over the last year as values just aren't the same as what they used to be! CEFs have become expensive. Then I'd say another ~30% is in dividend growth stocks that I've been sharing more on with my Cash Builder Opportunities profile. seekingalpha.com/...

Then that leaves another very small sleeve of speculative-type stocks. Some of those names include SPCE, CLIR, and other really oddball holdings you'd never expect an income investor to hold!

That's the broader breakdown of my portfolio. A loose rule I use for allocations is that I don't want anyone CEF to be more than 8% of my overall assets, or for an individual stock to be any more than 4%. These are just arbitrary numbers that I've decided that I'm comfortable with.

The larger allocation allowed for CEFs being that they are naturally more diversified than an individual stock. Though my dividend sleeve names can sometimes breach my 4% allocation rule as I write puts and take assignments of shares. ABBV is a recent example of this (again, shared this on my CBO profile, here's that particular article. seekingalpha.com/...

My CEF portfolio does the heavy lifting in my case, where it funds the rest of my investments. I hope this helps!
craftbrewinfo profile picture
@Nick Ackerman interesting. yes it does help. We are opposite LOL I have the 70% in DGI /30% in CEF's and you are reverse. I have two IRA's... my traditional is my income portfolio, at the previously mentioned 70/30 allocation split. My Roth IRA is for the speculative/hyper growth stocks ( think PLTR /AMZN, SAM, etc..). So this gives me another perspective. As long as I choose quality CEF's at a modest discount or better ( especially covering the distributions with NAV increases), I feel much better. appreciate that feedback. Just makes sense, you know? if the CEF has good metrics, you will earn a much higher yield than with stocks or ETF's...
Nick Ackerman profile picture
@craftbrewinfo indeed! That seems to be the case! Thank you for your additional thoughts.
They need to restore previous monthly distribution that the cut.
Nick Ackerman profile picture
@MLian I wouldn't complain. BlackRock just announced increases to several of their funds that I'm long. BDJ wasn't one of them yet.
@Nick Ackerman so, are you expecting BDJ will raise too?
Nick Ackerman profile picture
@MLian it looks like they have the capacity to this year. However, since they didn't with this latest round - I think that diminishes the chances we see an increase this year. However, BlackRock announces distributions every month so there is still some chance.
hawkeyec profile picture
I have BOE which seems to be the global version of this dividend fund. Has a slightly higher yield and I have a decent gain in it. One of my few equity funds.
@hawkeyec Personally, I have a hard time pulling the trigger on BOE. I love the international bent but the performance isn’t there. It’s lost half of its NAV in the last 15 years and every few years it’s cut it’s distribution. Not very appealing based on past metrics.

I went back into BDJ last week. I’ve been getting back into a lot of issues as we’ve been pulling back. Staying away from most tech although I did pick up some BSTZ. More interested in getting more floating and financial focused exposure than I previously held.
Nick Ackerman profile picture
@hawkeyec I have added BOE to my portfolio, I believe at the end of 2020. Agreed, it is essentially the global version and I'm hopeful international positions can turn themselves around. The U.S. has been the dominant place to invest for an extended period of time. Historically, that hasn't always been the case.
Nick Ackerman profile picture
@SeattleKraken fair points! As I mentioned in my other reply to hawkeyec; historically, the U.S. outperformance now has been getting a bit stretched. I'm thinking it might be time for international stocks at their generally better valuations, to show some life. Of course, that might not happen and BOE continues to be the laggard. I don't mind holding both just in case I'm wrong.
ron2004 profile picture
Long BDJ !!!
Nick Ackerman profile picture
@ron2004 thank you for reading and good luck to us both!
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