NCZ's Embarrassing 'Postponed' Distribution

Summary

  • Leverage can add a lot to a closed-end fund's income, by taking advantage of cheap (sometimes very cheap) interest rates available to large institutional investors.
  • But it has its downside risks, as we saw July 1st when Virtus Capital & Income Fund II had to delay its dividend payment and put next month's on hold.
  • While NCZ managed to fix its regulatory problem (leverage slightly over the 50% maximum) very quickly, it was a surprise and shock to many investors who were caught unaware.
  • Was NCZ outside the mainstream and taking more risk than the average fund? Let's take a look.
  • Looking for more investing ideas like this one? Get them exclusively at Inside the Income Factory. Learn More »
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[This article was first published for Inside the Income Factory members and free-trial subscribers on July 8.]

Leverage: Prudent Income Booster.......... Or High-Wire Act?

Virtus Convertible & Income Fund II's (NYSE:NCZ) suspension of its dividend payments (initial announcement

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Analyst’s Disclosure:I/we have a beneficial long position in the shares of PDO, NCZ 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.

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