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Voya Global Equity Dividend and Message Board

  • maaveriks maaveriks Jul 26, 2010 10:42 AM Flag

    What's not to like?

    Monthly pay buy/write CEF going ex-div on monday (meaning you must own by Friday), over an 11% yield and still at a discount even though it has spent most of the last year at a premium. Certainly, the dividend cuts have weighed on the premium it once had but that is all behind and there is virtually no chance of any more cuts.

    I'm looking at some of the quarterly pay global buy/write funds that have moved to premiums recently and I'm saying IGD is a MUCH better value at a discount, a monthly pay and with more of a defensive position with some index put options. JMHO.

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    • I would be all over IGD right now...not up very much in a strong market while most other buy/write funds which are at premiums are up alot more, including all the other ING funds, most of which won't go ex-div til October!!

      Should be around par with NAV after today with an ex-div date coming up and an 11% yield.

    • Don't forget, IGD buys index put options for downside protection.

    • You're comparing apples and oranges. IGD and GIM aren't even close in strategy. GIM is all foreign debt, IGD is all equities, about 40%/60% US/Foreign. IGD uses a covered call strategy to generate income, GIM just offers bond yields (neither use leverage).

      GIM yields 5.3%, IGD yields over twice that at 10.92%. GIM is at a 2% premium to NAV, IGD is at a slight discount. In CEF land, higher yields usually mean higher valuations though IGD has suffered due to 2 dividend cuts this year to get the payout more in line with reduced option income from reduced volatility. IGD is going to be more risk/reward oriented.

      Bottom line is that these two funds shouldn't be compared at all (would you compare a Fidelity blue chip stock fund with a PIMCO US bond fund?) Both could be used in a balanced income portfolio though I don't know why anyone would pay a premium for a non-leveraged bond fund since the premium just eats into your yield.

    • the only thing I like, as a global move, is GIM
      These two track each other somewhat, but a look at why I like GIM over IGD see:
      I pass by Templeton every other day on my way to work and smile.

    • I compared prices using closing date 23 july 2010.
      I incorparated the fact that IGD slashed its dividend 2 times (total > 35%) and the subsequent market reaction to the fact that IGD is unable to maintain the initial distributions.

      Apparently this fact is of no importance to you.

    • IGD should be higher. How does one of ING's other intl. funds IAE go up almost 2% today when it just went ex-div, pays quarterly at less than a 10% yield and yet still is at a 4% premium?

      I mean, who would buy IAE over IGD right now when IGD will go ex-div 3 more times before IAE and at a 11.2% yield? And yet, IGD is barely moving today! Crazy!

      • 1 Reply to lickwidity
      • The yield is calculated on an annual basis. It does not matter whether you receive it in montly or quarterly terms.
        (It does have an impact if you reinvest dividends.)

        Also dividend does not say that much, as my calculation above already indicates.

        The fund distributes money and will have less value because of that.
        This is usually reflected in a lower share price at ex-dividend date.

        Look at it in this way. The most famous investor Buffet aims at an annual return of 15%.
        If this fund would return 11% without effort, the managers would possess Buffet like qualities and the managers would be world famous.
        I think they are not.

    • I compared IGD with SPY.

      Suppose you had invested 10.000 at the first trading day of a year and opted for cash
      How would IGD have done compared to SPY?
      The results are as follows:

      2006: IGD + 14,43%
      2007: IGD - 1,67%
      2008: IGD - 3.72%
      2009: IGD - 4,77%

      The valuation compared to NAV were as follows

      2006 -6% to NAV
      2007 +5% to NAV
      2008 -11% to NAV
      2009 -16% to NAV

      So if you had to invest 10.000 at the beginning of a year, 3 out of 4 times you would have been better off with SPY.
      Also in this case, it does not matter much whether the discount to NAV is big or not. Perhaps this is so because the market participants correctly anticipated the subsequent development of the NAV.

      In my view by chosing a buy and write fund, you take on a substantial additional risk. The option game is a zero sum game, so a lot depends on the ability of the manager of the fund.
      Of course they will say that their trading strategy is backtested and superior. But that is the belief of the option buyer too.

      • 1 Reply to jl.meyers
      • IGD sells $15 million worth of options roughly each month and pays out only $9.7 million with the reduced dividend. Not only is their coverage WAY over what it used to be but selling call options is a defensive maneuver in and of itself! But wait, they go one step further! They take some of the extra option premium to buy some out of the money index puts! Even if those puts expire worthless, it's an insurance policy that not too many buy/write CEF's have. So tell me again, how is IGD more risky with this strategy?

        And why are you comparing IGD, which is a global fund to the SPY, which is domestic? And finally, add back the annual dividends to the market price and NAV performance if you want to do an apples to apples comparison.

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