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Eaton Vance Tax-Managed Diversi Message Board

  • mike57dk mike57dk Jan 29, 2013 1:28 PM Flag

    $10 per share market price reached ...at least inter-day ..lol

    Last time we saw $10 per share was in July 2011 ...and the fund slashed the dividend ...resulting in an avalanche of sell transactions ....
    Today - the fund is spending $5-8 million dollars per month buying back its own shares ...we just booked a solid year of a plus 16-17% market return ....beating the S&P index handily ...fund is reporting a healthy plus $250,000,000 in net unrealized appreciation ...just switched to a monthly distribution and respected authors are penning articles about how this is an undervalued fund with a potential for good short and long term performance ....( Seeking Alpha )
    ETY's NAV is slowly but steadily growing .....and will " drag " the market price slowly up along with it ...they have no problem meeting the monthly dividend distribution and have the flexibility in place to simply sell more index options each month to create more income ...if needed.
    The fund has about $450,000,000 in carryforward losses to " wash " against every capital gain / profit taking transaction they make ...for the next five years ....so...we have an effective capital gains taxation rate of .....ZERO.
    We will be paying federal income taxes on the interest / dividend stream ....call it $0.15 of the $1 per share we expect to get paid in 2013 ( non-guaranteed )....so your effective taxation rate per $1 paid will be your marginal tax rate ....25% for most of us ....so we will owe about $0.04 per $1.00 actually paid us ...less for many retirees ....ballpark it between 3-4%

    We still get a nice Discount to NAV for our reinvestments / purchases ....12% ish I believe ...

    The fund holds 121 stocks ...no bonds / no leverage ....some of the best companies in the world ...75% US - 25% Europe / developed Asia ....all " Blue Chips "

    Continue to hold and reinvest monthly dividends ....may look to ADD slightly with any fall back on the price ....or as I clip the 2012 underperformers from the portfolio ...using those proceeds to pay for it.

    EVERYONE who purchased ETY at the inception date ....and reinvested the dividends ....has MORE money than when they started .... about 5% more at the minimum.

    Regards - Mike

    Sentiment: Hold

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    • Good summary. While 5% does not sound like much after all these years, it's important to remember that we went through some pretty horrific market dips. The dividend re-investing certainly helped.
      What I don't understand is how ETY is getting the cash to buy it's own stocks. Is it cash that would otherwise have been distributed?

      • 2 Replies to little_browneyed_boy
      • ETY just constructed a new employee lounge. All the old vending machines were taken to the scrap yard and hoisted high into the air by a crane. Once dropped, management scrambled up to the shattered machines and gathered all the stray coins.

      • had typed in a more detailed repsonse ...but it wont post on Yahoo for some reason ....

        here is the gist of it ....ETY reported having $282 million in Unrealized capital gains in the portfolio as of 10/31/12 ...
        They are selling stocks, both winners and losers with a 30% typical portfolio turnover each year ...in fiscal 2012 they realized $161 million in gains ..and increased their unrealized capital gains in the portfolio to about $282 million.

        The fund has 150,969,916 shares outstanding paying $0.084 per share each month in 2013 ...so to grow the NAV and be healthy ....ETY must pay out about $12,700,000 each month ....or about $152 million each year ...

        They " earned " $1.20 per share in 2012, lost ( $0.106 ) in 2011, earned $1.079 in 2010 and earned $1.72 per share in 2009 ....and back in 2008 ...they lost ( $4.810 per share )

        They have carryforward losses of $450,000,000 on the books to wash against future capital gain transactions thru 2018 at least...

        They get the cash to spend between $7-9 million each month on buying shares of ETY from the liquidations in their portfolio ...30% annual turnover ....and NO ...they have adpoted a managed distribution policy ....so that $0.084 monthly dividend is what we get ...unless they announce a change ....

        The fund is healthy with almost two years of unrealized capital gains / dividend distributions on the books ...subject to market change ....lol ..look at Apple ...bet that smacked them a good bit ...

        The next report will be published in April and will cover the six months ending in March 2013 ...should be a good update ...

        Sentiment: Hold

 
ETY
11.85-0.04(-0.34%)Aug 28 4:02 PMEDT

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