ETY started the year at $9.37 per share ...and has staggered its way thru fits and starts to $10.28 at this writing while paying out six dividends of $0.084 thru June or $0.50 per share ...
YTD Total Return would be + 0.91 per share from market price appreciation and the $0.50 from dividends paid out ...or $1.41 per shr total / $9.37 starting price = + 15% ytd Total return.
The NAV is being quoted at $11.18 or a raw $0.90 per share discount to market price or roughly an 8% discount ...
Fund management continues its monthly share buyback and has been ball parking about $5,000,000 per month of buying its own shares ....even booking about a 14% profit on the transactions per their latest update / report. Their mandate allows them to re-purchase up to 10% of the outstanding shares and they have plenty of room remaining ....my guess is that fund management might have moved aggressively to purchase even more market shares when the price sagged below $9.70 recently ...it would have been a smart move ...with the NAV actually going up during the recent market down days ....( their S&P call contracts ..of which they had at least 6,000 open contracts and probably more like 8,500 depending on the average monthly positions must have spiked up in value with 500 point down days in the market )
So ...the fund has reached the 1/2 year mark ....and has " delivered " a 15% ytd return ....with about 85% of the dividend distribution being treated as tax free Return of Capital.
They continue to buy back shares in the open market ....reducing the total outstanding by a good amount each month ...and thereby supporting the market value .....
ETY has easily maintained the $0.084 monthly dividend since Jan when they switched to monthly distribution from the quarterly format ....so the primary reason to OWN / HOLD this fund ....high tax advantaged income ...remains intact ...we expected to earn 10.7% in annual dividends from this fund ...at " half-time " they are on track.
All of this talk of selling ETY and ROC latter rather paying tax on the gain of dividend you already spent? Try buying AOD or PHK may be you make little or no money or better yet buy ARR or CIM great tax loss May be then you can lose enought money you will not need to claim any gain here? Rather is paying tax on money you made that bad renounce your usa citizenship move to another country then pay no usa tax. hope that helps? Best answer make no money invest in PTRAX loss to write off there but nothing to spend sorry. PTRAX 251.11 BILLION BOND FUND YTD LOSS 3.36% PIMCO's Bill Gross ONE OF THE LARGEST BOND FUNDS IN THE WORLD!
Sentiment: Strong Buy
Good Morning and thanks for your observations on ETY.
The intent of my earlier comment was to illustrate the true performance of ETY over the past few years and the fund management's efforts to bring value and make the fund attractive again ...and after the disastrous markets in 2008 and 2009.
The fund is trading at $10.30 at this writing with an NAV of $11.46 which represents a discount to NAV of about 10.1% ...That equates to a Current annualized dividend yield of 9.7%....( very attractive in this environment )
Fund management is literally buying back millions of dollars of shares each month ....thereby reducing the number of outstanding shares ....and supporting the market price ...while closing the discount to NAV variance ....all of which bodes well for the market price.
The estimated total return for ETY on a YTD basis is $0.084 monthly dividend x 8 months of 2013 = $0.67 per share ....PLUS ....the capital gain component of $10.30 -$9.37 =$0.93 per share ... totaling $1.60 per share / $9.37 starting price on Jan 1, 2013 = + 17.07%
This morning's paper had the YTD performance of the DOW at + 15% and lets assume some dividends from that index would have been earned as well ....ETY is still being very competitive and is slightly outperforming several of the indices typically used to grade the overall performance of the fund.
The fund's monthly dividend is typically classified as 85% ROC and is therefore non-taxable to the portion of the dividend designated as ROC...BUT ...the overall cost basis of your ETY purchase is also reduced by the ROC component.
Summary - We are making money on this fund ....last year and YTD 2013 ....and at a comparable rate to the major stock indices ...I had targeted a + 20% total return from ETY for 2013 as an appropriate investment goal ...and the fund is tracking to achieve that ...and more as of this writing ... whereas...the PIMCO fund you reference is actually DOWN - 4.97% on a YTD basis ..+ 17% ytd Versus - 4.97% ...Ouch
Don't monitor the mktprc where the traders are but monitor the "NAV" where the true value is. ETY is currently performing to numerical predictions when looking at the numb3rs....
Oddly Morningstar only gives them 2 stars and whines about destructive return of capital. Not sure if the analyst understands that the options are what's funding that. Even Morningstar shows ETY's 3 year annualized total return on NAV is 11.5%, so it's hard to see where they think there's been a destruction of capital.
Anyway, I often find investing contrary to what Morningstar seems to be implying works out well. I have ETV, ETB and ETY now and have been pleased with the returns and gains.
Reply to barmy_madeoff :
Yeah ...the ROC component is certainly misleading and gives typical ratings agencies like Morningstar fits ...even Yahoo Finance won't annualize the monthly dividend since 80-85% is composed of ROC. The result being that many investors looking a the financial summary will see a forward yield of 2% on ETY ....instead of the 10% ish we have come to expect ...and love.
ETY has a portfolio turnover of about 30% ....so they have approximate proceeds of around $480,000,000 per year from their Sales transactions ....they are paying the dividend with some of this cash ....and selling their losing positions while retaining the winners ..the net result being that the fund has over + $400,000,000 in unrealized GAINS in their portfolio ...which looks very good and much improved from a few years ago ....we get the 10% distribution taxed overall around 3-4% based on your tax bracket ...the ROC does reduce the cost basis a bit each month ...but its hard to notice as most investors are reinvesting the dividends anyway ....
ETY management is closing out the options typically after two weeks of duration and is actually LOSING money on most of them ....Its a good deal for them and us as we get the portfolio gains that more than offset the option position losses ....and the CALL options do protect us in the event of a sudden market downturn ..( - 500 point days for example )
The NAV is quoted about a dollar a share above the market price ...and has been steadily improving ...while the fund buys back $5,000,000 per month of its own shares ..thus reducing the number of shares in the public float each month ....
Fund management has " seen-the-light " and is determined to reduce the discount to NAV ..and they switched to monthly dividends instead of quarterly at year end 2012 ...
Lots to like about this fund ....OH ...every investor who purchased ETY at $20 per share on the IPO and reinvested dividends since then is SOLIDLY in the black at this point ...