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Aberdeen Asia-Pacific Income Fu Message Board

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  • rainguage rainguage Jan 15, 2000 9:17 AM Flag


    but, how does the increase in interest rates relate to a dividend cut?

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    • again that I agree that FAX has disappointed me
      to and I bought it at 5 7/16, watched it go to 6 7/8
      and back down again. But it is my understanding that
      FAX has not paid their dividend from operational
      earnings since the last rights offering was completed; In
      fact they stated as much that the .72 through March
      was based partly on capital gains. Well, with rising
      interest rates, FAX has seen the underlying market value
      of their bonds decrease and have had no opportunity
      to generate additional capital gains through
      portfolio turnover. Thus, income from investments remains
      static and their capital gains are about spent; And
      guess what, we can probably expect a dividend

      There is chance that the dividend cut could be
      temporary if interest rates fall which could put FAX in a
      position to once again start generating capital gains
      through portfolio turnover; but I wouldn't hold my
      breath. It's more likely that FAX will have another
      rights offering to generate more cash to invest which
      would dilute our share NAV just like before. Just
      another cycle like we have just experienced. If interest
      rates would have fallen even more, which some were
      predicting, the capital gains flow would have continued and
      the dividend would have been safe. I can remember
      predictions that the long bond would go to 3.5% about the
      same time that FAX was completing the rights offering.
      We all know now that didn't happen. However, there
      are those that predict that long bond rates will be
      under 6% by year end.

      Also, don't forget there
      is one other wild card, and that is the Aust.$.

      • 1 Reply to axzl
      • that you see no hope for any stability or gain.
        Is that corect? If so, IYHO, should we just take our
        licks and get out? Just read a neat article by Paul
        Sturm in the Feb. issue of Smart Money. He advocates CE
        municipal bond funds because of their deep discount. One, a
        high quality, paying a taxable equivalent
        of 9%. Thanks for your thoughtful replies. I have
        just started using the net and have discovered the
        Dividend History feature in Yahoo. If I had had that at
        the time I bought FAX, and seen the declining
        dividends, I would not have bought.

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