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Eaton Vance Tax-Managed Diversi Message Board

  • jsc41w104 jsc41w104 Dec 13, 2012 6:09 AM Flag

    mike57dk question

    Hello mike, a your well versed in even ce funds, do you have any insight into the Dec 12 distribution now that the fund is going to monthly distributions?
    Thanks jd

    Sentiment: Strong Buy

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    • Saw your question and here is my opinion:
      1. The change to a monthly distribution is smart business for EV fund management ...This should help make the fund much more attractive to investors seeking a regular monthly payment from their holdings ...and they stated that the quarterly $0.253 quarterly distribution will instead now be a $ 0.084 monthly distribution ...( same ) ...about 10.8% annualized
      2. This should REDUCE the huge numbers of dividend " chicken-hawks " that had been swooping into the fund a week or two before ex date ....buying shares ...then dumping them a few short days or weeks later effect grabbing a raw 2.7% gain in just 2-3 weeks of investment duration ...This was always risky ...but the reward of grabbing a quick 2% + will now be eliminated as there will ONLY be about $0.08 to grab ...and with the fund's market price declining after each dividend payment ...these so-called " dividend chickenhawks " will disappear ..which will be good for the rest of us who had been left with the dramatic price changes in the fund they had previously caused.
      3.The fund is ALSO buying back shares at an impressive rate ...$ 5-$8 million in the first two months of the share re-purchase program ...this will help lower the huge DISCOUNT to NAV while improving the market price ...
      4. I disagree that the fund is short changing investors ....we just picked up the Nov end distribution of $0.253 per share with the next scheduled quarterly payment set for late Feb changing to a monthly plan ...Investors will pick up an $0.84 payment in Jan, another in late Feb so we are reduced cash flow by $0.084 for 30 days ...but we got paid two months earlier for the Jan & Feb payments ...NOT a big deal for me ...and I hope the monthly payment aspect will ATTRACT a whole new series of investors looking for monthly income.
      5. The tax law changes I have been harping about will take place in TWO WEEKS ...and even small investors will start getting " whacked " with HUGE new capital gains rates / dividend taxes and even Obamacare investment taxes ....ETY will produce around $1.01 per share in dividend distribution in 2013 ...with an effective tax rate of THREE PERCENT on that aggregate amount ...THREE PERCENT for most of us ....Your certificate of deposit interest will be taxed at an average rate of 30% ...your dividends even higher ( as much as 43.4% ) ....ETY will look like NIRVANA compared to bond interest /CDs / stock dividends ....rental income ....
      6. Here is a compelling example ....I asked this question of a Congressman here in Texas ...and he just hung his head in shame ..( Republican too and considered one of the smart guys )

      Retiree aged 83, living on Social Security of about $20,000 per year ....and augmenting that with $10,000 of dividends and interest payments from her life savings ....her taxes will LITERALLY go from getting about a $500 annual tax refund from the IRS ... to where she will NOW OWE the Federal government approximately $3,000 -$4,000 in taxes each year due to the tax changes ....
      I asked him to justify making senior citizens pay $3,000-$4,000 MORE each year ....not the millionaires and billionaires the President and Congress are talking about .... This will wipe out seniors very limited savings just a few years. Thats when he hung his head in shame ...blaming the Democrats ....the President ..the weather ...
      The point being ...that these investors could AND should move into funds like ETY ....and pay a net THREE PERCENT ( less in this example ) ....
      Hope this helps explain whu I am unconcerned about the change to monthly payments I believe that it will make the fund very attractive to investors ...getting slaughtered by huge new tax increases in 2013 ... Regards - Mike

      Sentiment: Hold

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