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BlackRock Providing Early Gifts

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CEFs, Dividend Growth Investing, Dividend Investing, ETF investing

Seeking Alpha Analyst Since 2011

Nick Ackerman is an avid student of the markets and has been investing in his own accounts for over 14 years. He is a former Financial Advisor and has previously qualified for holding Series 7 and Series 66 licenses. These licenses also specifically qualified him for the role of Registered Investment Adviser (RIA), i.e., he was registered as a fiduciary and could manage assets for a fee and give advice. Since then he has continued with his passion for investing through writing for Seeking Alpha, providing his knowledge, opinions, and insights of the investing world. His specific focus is on closed-end funds as an attractive way to achieve income as well as general financial planning strategies towards achieving one’s long term financial goals.


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The latest BlackRock distribution announcements came with increases to some of our favorite funds. These were positions we had been calling for increases for due to their earnings power.

BlackRock Science and Technology Trust (BST) went from a $0.226 monthly distribution to $0.25. That was after they've already been busy increasing the distribution. 

(Source - CEFConnect)

Here were our comments from our previous article.

Registered investment companies are required to pay out almost all of their realized gains and income annually. That is why BST could be on the hook for a special or another boost, at least based on these figures. The first half of the year saw just $32.178 million paid out. The second half could see around $43.5 million paid out. The end result should be approximately $75.7 million. That is well shy of the amount realized by the fund.

BlackRock Science and Technology Trust II (BSTZ) also increased its monthly distribution from $0.171 to $0.192. They too have been busy aggressively raising over recent history.

(Source - CEFConnect)

Here is what we had to say about BSTZ in our previous piece.

Part of the reason why CEFs pay out such large distributions is because they are required to as part of their structure. The majority of their income and realized capital gains are required to be distributed annually.

BSTZ increased its distribution last year by 15%. They turned around and boosted it substantially by another nearly 49% this year. That put it at a 71% increase from the $0.10 monthly distribution to the $0.171 monthly it pays out.

(Source - CEFConnect)

Looking at the latest Semi-Annual Report indicates that it might not be over yet either. They might be required to increase the distribution again or pay out a special by year-end. The one way around this is if they start taking losses and realizing them. In that way, the realized capital gain portion that they racked up the first 6-months could be offset.

BlackRock Enhanced Capital and Income Fund (CII) also gave us a bit of a boost. They went from a $0.093 distribution to $0.0995. Their last increase was just last quarter to that amount as well.

(Source - CEFConnect)

And yes, in our previous coverage we mentioned this as well. Ironically, before we could even get the article published publicly is when they increased the distribution.

To me, unless volatility really kicks up - I think we are due for an increase in the distribution. (This happened sooner than expected as they announced on July 2nd an increase.)

BlackRock Health Sciences Trust (BME) was another booster. This one is particularly special due to it being one of the few funds that have increased its distributions without ever cutting, while also having an inception previous to 2008's great financial crisis. The bump was from a monthly distribution of $0.20 to $0.213.

(Source - CEFConnect)

We didn't explicitly mention an increase in the case of BME in our previous coverage, but we did note how well covered it was.

This fund also has another way that it has been growing considerably. Since the fund trades at a regular premium, it can issue shares through an at-the-market offering. These are sold throughout the trading day and no one knows exactly when the shares are sold. The only stipulation is it must be done so when they believe the fund is trading at a premium. That isn't usually a problem until periods like now, where the premium might be quite shallow.

With that, the fund for the first 6-months raised over $34 million through their ATM and another almost $950k through dividend reinvestments. Interestingly, that was more than enough to "cover" the distributions paid out. Of course, it also means more distributions going out in the future too.

Combining the ATM, DRIP, and the fact that the fund has been performing, we can see that in 2016 the fund had $270 million in net assets to manage. Today that comes to the $625 million mentioned above. A full 131% larger now than it was just five years ago.

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Stanford Chemist, Nick Ackerman, Juan de la Hoz and Dividend Seeker

Analyst's Disclosure: I/we have a beneficial long position in the shares of BSTZ, BST, CII, BME either through stock ownership, options, or other derivatives.

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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