Dividends4Life: Yield-Hungry Investors Got Burned

Yield-Hungry Investors Got Burned

Posted by D4L | Thursday, October 18, 2012 | | 0 comments »

In the quest to find the perfect investment, value investors look to pay $0.50 for a dollar's worth of assets. With many closed-end funds, however, buyers who are desperate to find high-yielding investments are doing exactly the opposite -- and sometimes, they end up paying the consequences. The Barron's article this past weekend looked at closed-end funds that pay extremely high yields.

Using a combination of leverage and high-yield bonds, Pimco High Income (NYSE: PHK) has paid shareholders distributions that amount to about 12% of its current share price over the past year. But as the article noted, the prevailing share price was a full 70% higher than the fund's net asset value. Hunger for income likely drove shares to the huge premium to NAV, but the article did a good job of collapsing the share price. Shares have lost 15% this week alone, still leaving the fund trading at a steep 40% premium. Several similar funds that the article mentioned have seen similar drops.

Source: Motley Fool

Related Articles:
- 2011 Dividend Increases Nearly Doubled, and 7 Dividend Stocks that Led the Way
- 6 Dividend Stocks For The New Year
- Bonds Look Morbid When Compared To These Dividend Stocks
- The 2012 Dividend Aristocrats
- Best Stocks for 2012

Click here to have future posts delivered to you for free!



Post a Comment

Note: Only a member of this blog may post a comment.


Popular Posts Last 30 Days