Closing Prices 9/9/15:
The last update was published here: Update For Closed End Fund Basket As Of 8/27/15 - South Gent | Seeking Alpha
I have a lengthy discussion of leveraged bond CEF risks in the Appendix section to an earlier post: Update For Closed End Fund Basket Strategy As Of 8/14/15 - South Gent | Seeking Alpha I will not be repeating a discussion of those risks here.
I view the closed end portfolio to be a balanced worldwide portfolio within a larger portfolio that includes individual stock and bond selections.
I place an emphasis on income generation and own a number of CEFs that pay monthly dividends.
I will change the weightings in the CEF portfolio based on my opinions about the balance between risks and rewards.
I have tilted this portfolio some toward bonds this year, having sold a number of stock ETFs as chronicled in prior updates. It remains to be seen whether this shift will work. It may work simply by going down less than the far more heavily weighted stock CEF allocation from 2013-2014.
Update On Closed End Fund Basket Strategy As Of 7/28/15 - South Gent | Seeking Alpha (net realized gain=$2,604.98)
The major stock CEF elimination discussed in that update was Adams Diversified Equity (NYSE:ADX)(formerly known as Adams Express)-Eliminated (+$1,983.24). Another one was a reduction in my CHN position: China Fund (NYSE:CHN)-Reduced Then Bought Back 50 Shares (+$47.8 and +$302.47)
I referenced selling activity that generated $+$4,073.7 in profits since November 2014 through the post date here: Update For Closed End Fund Portfolio As Of 4/8/15 - South Gent | Seeking Alpha
The stock CEF dispositions included the following:
Sold 433+ RMT at $12.76-Average Cost Per Share $7.91 (12/18/14 Post)(profit snapshot$2,057.88)
Sold 221+ CSQ at $11.17 (4/1/15 Post)(profit Snapshot=$630.79)
Sold 100 of 200 DPG at $20.74 (2/17/14 Post)(profit snapshot=$200.07)
SOLD 50 DPG at $22.42-Roth IRA (11/29/14 Post) (profit snapshot=$124.99)
Lastly, I referenced a large number of dispositions in my November 2014 update that started in October 2013: Closed End Fund Portfolio: Update - South Gent | Seeking Alpha
Those included the following stock CEFs:
Items #2 and # 6 Sold: 50 CET at $23.58, 200 BIF at $7.65 (combined profit $391.15)
Item # 1 Sold 107+ GAM at $34.44 (profit +$476.56)
Item # 1 Sold 201+ MSF at $15.62 (10/14/13 Post) (profit $109.64)
Item # 1 Sold: 200 GDV at $21.03 (12/12/13 Post) (profit +$1,393.8)
Item 1 Sold: 100 JLA at $12.62-Roth IRA and 200 JLA at $12.63-Taxable Account (12/17/13 Post) (snapshot of 2013 trading gains=$220.89)
Items #1 and # 5 SOLD: 209+ ZTR at $13.88, 202+ NMO at $12.33 (1/20/14 Post) (combined profit=$246.29)
Items # 6 and # 7 Sold Taxable Account: 126 RMT at $12.6 and 100 CSQ at $12-Part of Ongoing Stock Allocation Reductio(7/12/2014 Post) (combined profit=$321.45, with pare of RMT being solely shares bought with dividends)
Item # 8 Sold 180 CSQ at $12.19 (9/6/14 Post) (profit +$514.14)
Item # 1 Sold: 471+ IGD at $9.77 (9/13/14 Post) (profit +573.83)
CEF Basket as of 9/9/15:
A .26% decline today is acceptable.
My former holding in ARMF was reorganized into ARDC: Ares Announces Closing of Reorganization of Its Closed-End Funds
I have had only one transaction since the last update.
1. Bought Back 100 PDT at $12.75-Roth IRA Account
Closing Price Day of Purchase: PDT: $12.81 +0.11 (+0.87%)
My last transaction was to sell 200 shares at $14.26: Item # 1 Pared Interest Rate Risk by Selling in a Taxable Account: 200 PDT at $14.26 (2/11/15 Post)-Item # 1 Bought: 200 PDT at $11.73 (10/24/13 Post)
The John Hancock Premium Dividend Fund (NYSE:PDT) is a leveraged balanced closed end fund. The common stock component includes electric utility and natural resource companies that pay decent dividends. Preferred securities would generally encompass more than equity preferred stocks or traditional preferred stocks, and would include trust preferred securities and European hybrids (in effect junior bonds). Some senior exchange traded bonds will generally be found in the portfolio mix.
It would be helpful for a sponsor to specifically break out the various categories in the holdings list. As of 4/30/15, PDT owned several equity preferred stocks that would pay qualified dividends.
I noticed several securities that are exchange traded bonds that pay interest including the following:
BGE Capital Trust (BGEPRB) 6.2% Trust Preferred (in effect a junior bond)
DTE Energy (DTQ) 5.25% Junior Subordinated Bond
DTE Energy (DTZ) 6.5% Junior Subordinated Bond
Duke Energy (DUKH) 5.125% Junior Subordinated Bond
Entergy Mississippi (EFM) 6.25% First Mortgage Bond
Next Energy Capital 5.125% (NEEPRI) Junior Bond
Next Energy Capital 5.7% (NEEPRC) Junior Bond
Stanley Black & Decker (SWJ) Junior Subordinated Bond
Telephone and Data Systems (TDI) 6.625% Senior Bond
Telephone and Data Systems (TDE) 6.875% Senior Bond
United States Cellular (UZA) 6.95% Senior Bond
Verizon (VZA) 5.9% Senior Bond
The fund owned one Aegon hybrid security, AED. which is in effect a junior bond: Stocks, Bonds & Politics: Aegon Hybrids: Gateway Post; AED Prospectus
The foregoing is not a comprehensive list of non-equity preferred stocks owned by this fund.
The common stock positions are mostly utility, telecommunication and energy stocks:
As of 4/30/15:
Data on Date of Trade (9/8/15):
Closing Net Asset Value Per Share: $14.67
Closing Market Price: $12.81
1 Year -10.21%
3 Years - 8.95%
5 Years - 6.72%
Sourced: CEFConnect Page for PDT
Sponsor's Website: Premium Dividend Fund
PDT closed today at a 11.82% discount to its net asset value.
Last SEC Filed Shareholder Report (period ending 4/30/15)(page 2-annual average total returns over 10 years through 4/30/15 was 10.46%;
PDT Page at Morningstar (currently rated 3 stars; some recent ROC dividend support; leveraged at 35.02%)
The stock went ex dividend on the day after my purchase. John Hancock Closed-End Funds Declare Monthly Distributions
This purchase was made in a Roth IRA to add incremental monthly cash flow.
Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.
Disclosure: I am/we are long PDT.