When this closed-end fund (CEF) lowered its monthly dividend for the first time in 17 years, many income investors (understandably) panicked and sold.
Too bad for them. They missed out on 27% returns over the next 20 months.
Can a dividend cut actually be a good thing? Like life itself, it’s complicated—but my short answer is “yes.” Here’s when (and why).
CEFs are the exception to the “dividend cuts are bad” rule. In CEF-Land, payouts are taken from a fund’s portfolio, which is represented by a fund’s net asset value (NAV). Sure, the funds that we buy generally have income streams that are supposed to “power” NAV higher.… Read more