Sorry, I responded earlier but it did not post, let's try and reconstruct it now but because of time constraints it would be shorter - but no less to the point:
Bill Gross would have not done anything better if he were to cut the dividend - the NAV is his true track record and it has been mediocre at best since markets have stabilized around mid 2010.
In fact, his track record has been boosted by the scheme Pimco has been orchestrating with their dividend re-investment plan.
Pimco has been re-investing dividends and issuing more shares for people who do automatic dividend re-investing at prices much above NAV (and a bit below market prices. Still , anyone who re-invests his dividends allows Pimco to issue him new shares at premiums of 35-45% above NAV - then Gross takes this new source of funds and goes to the market to buy securities at market prices paying investors with some of the proceeds.
Even this unethical (but legal, it is in the prospectus, but how many of the investors are aware of it?) practice has not managed to boost NAV returns over peers over the past year or so.
Managed distributions like PHK's work until they don't. Other CEF's have had to reduce managed distributions due to market conditions and it can happen here as well.
Lastly, I point your attention to two important issues:
The high returns achieved by PHK (and even the lower relative returns to its peers over the past year) were done with the cost of HUGE volatility which means a very high degree of risk.
Check out the standard deviation of the fund's market price and NAV and you would discover shocking news : it is higher by a factor of about 3 than the SP 500!!
That means that you could have owned the SP 500, even the QQQ or better yet the IWM - gotten much higher returns but do it withe LOWER VOLATILITY!! An investor's wet dream if I can think of one.
Another issue to point out: as of the last available quarter (March 11) PHK's distributions were about 34% over what it earned in income !
Where did the 8.2c/share come from? Either return of capital or capital gains - they do not specify.
If it is return of capital - that's no good, especially if you re-invest your dividends at a premium of 35-45%.
If it is capital gains, it is better but then, can one bank on capital gains to continue for ever? I will take that bet against anyone.
My guess is the second quarter would show an even larger part of over payment of distribution vs. income earned.
It is quite impossible to distribute over 16% on NAV in today's market environment without taking undue risk, high leverage or returning capital.
What was doable with NAV at 15 when the fund was issued is not doable now when the fund struggles to keep NAv above 9 and rates are much lower.
Hope my comments make sense and I always appreciate sensible and to the point responses.