Does A 35% Discount To NAV Outweigh This Fund’s Underlying Challenges?
Looking To The Left Of The Equal Sign
Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.
I’ve mentioned in this space before that because closed-end funds can trade at premiums or discounts to NAV, even below average funds can look reasonably attractive if the value is good enough. They may have poor track records or little idiosyncrasies that you wish weren’t there, but if the portfolio is positioned right and you can buy it at a bargain basement price, it just might be worth a longer look. We’re going to put that to the test today with the Dividend & Income Fund (DNIF).
This is a fund that I originally reviewed about two years ago. I spent some time focusing on the fund’s wild backstory, which includes shareholder-unfriendly rights offerings, battles with activist investors and a voluntary delisting of shares from the NYSE due to “the burden of governance, shareholder meetings, and reporting requirements of the NYSE”. While those factors can have some impact on the fund itself, I want to focus on DNIF strictly as an investment opportunity. If you catch it at just the right time, the returns coupled with a potentially shrinking discount could mean real above average performance, but is now that time?
Fund Background
DNIF’s primary investment objective is high current income with a secondary objective of capital appreciation. It typically invests solely in income generating equity securities and its strategy is to seek companies with strong operations showing superior returns on equity and assets with reasonable valuations. Generally, DNIF purchases and holds income generating equity securities of profitable, growing, and conservatively valued companies across a broad array of industries. It also uses a modest degree of leverage in order to enhance yield and total return potential.
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