Closed-End Fund Mastery Weekly Distribution Changes (cont...)

I sent out a post earlier showing the 16 distribution changes already announced this week in anticipation of more to come. Fortunately, I only have an addition three more to announce from GIM, IFN, and TEI.

Sadly, IFN is a 'CEF Mastery' qualifying fund. It's sad for me because it gets added to the report card as a miss for 'CEF Mastery.' However, despite my record being scarred by this cut and the other two cuts from ASG, and USA, which makes up the bulk of the $0.184 in distribution cuts realized by 'CEF Mastery,' these cuts were predictable and are in part why these funds are 'CEF Mastery' qualifying funds. I'm going to explain and, in the process, show you how you can also predict these cuts as well.

'Income Only' and 'Managed Distribution'

There are two types of closed end funds: 'Income Only' funds and 'Managed Distribution' funds.

'Income Only' funds tend to pay out the bulk of their distributions from, you guessed it, income only. This income is generated in the form of dividend and interest income and realized gains. These funds typically use large sums of leverage to maintain these distributions.

'Managed Distribution' funds have more flexibility in how these distributions get paid. They can use profits from unrealized gains or return of capital to make up their distributions in addition to the dividend, interest, and realized gains received.

These two terms, 'Income Only' and 'Managed Distribution' give an investor a general idea of how a fund treats its distributions but there is no hard fast rule that restricts the fund some flexibility, for example, there are 'Income Only' funds that do return capital from time to time.

'Income Only' vs 'Managed Distribution'

Of the 326 highest yielding closed end funds tracked and scored by 'CEF Mastery,' only 93 of them are 'Managed Distribution' funds.

Over time, there is a clear difference in the performances of one type over the other. Overall, for the 3-year, 5-year, and 5-year NAV change returns, 'Managed Distribution' funds perform better. The three-year and five-year returns assume distributions are reinvested.

'Income Only' vs 'Managed Distribution' vs 'CEF Mastery'

I'm not going to lie. When a 'CEF Mastery' qualifying fund cuts its distribution, I take it personally, even when I know the cut is coming. However, I have complete faith in 'CEF Mastery' and I have the data to back it up. I've posted YouTube videos demonstrating the many ways 'CEF Mastery' consistently outperforms over the long-term. Comparing 'Income Only' and 'Managed Distribution' funds is another example.

The blue bars represent all 326 closed end funds, and the green bars are 'CEF Mastery.' On the left of the chart is the 'Managed Distribution' 3-year, 5-year, and 5-year NAV change. On the right are 'Income Only' funds. The blue is the 326 funds, and the green is 'CEF Mastery.'

'CEF Mastery' clearly outperforms in all categories, especially the five-year NAV change returns. What's really interesting is that 'Managed Distribution' funds still benefited from 'CEF Mastery' but 'CEF Mastery' also closed a significant portion of the 'Income Only' performance gap between managed and income only.

Can You Predict the Future?

The India Fund, Inc., or 'IFN,' is a 'Managed Distribution' fund. As is, 'ASG' and 'USA.' The one thing that these three funds have in common is that their 'Managed Distribution' policy is to pay a percentage of the funds rolling average Net Asset Value (NAV) in distributions. 'IFN' currently pays ten percent of the funds rolling average. If you look at the chart below, it's as if you're looking into a crystal ball.

The downtrend in NAV for 'IFN' started in Sept. '21 which continues to this day but you will notice that in Dec. '21, despite the decline in NAV, they raised their distribution to $.64. 'IFN' paid out nearly 61% of their distributions as return of capital, or (ROC), but in the new year started in 2022, the distributions are following the NAV. As a matter of fact, the NAV trend seems to be sharper than the rate of distribution cuts, so absent a turnaround in NAV, another cut will likely be on the way.

Happy Friday the 13th!

Lee Wentker

TheDividendTimes@outlook.com

If you aren't a subscriber, a free 'CEF Mastery Super Screener and Interactive Report' is available by entering 'Free Report' in the subject line of your email to the address TheDividendTimes@outlook.com.

or

You can receive one free month of reports (weekly) with an annual subscription of just $49.95/yr.

Subscribe @ 'CEF Mastery' Closed-End Fund Subscription (gumroad.com )

'Closed End Fund Mastery' is best viewed in Microsoft Excel (Excel 360 to use charts). A .pdf version is available, sorted by Fund Ticker upon request.

or watch Part 1 (Part 1 has a link to Part 2) of the 'CEF Mastery Super Screener and Interactive Report' on YouTube.

Part1 CEF Mastery Super Screener - YouTube

0 comments

CEF Mastery Distribution Change Report 01/24/25

CEF Mastery Weekly Distribution Report 01/17/25

CEF Mastery Distribution Change Report 01/10/25

'CEF Mastery' Distribution Change Report 01/03/25

'CEF Mastery' Distribution Change Report 12/27/24

See all posts from The Dividend Times