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San Juan Basin Royalty Trust Message Board

  • AlienTrader AlienTrader Jun 20, 2006 3:37 PM Flag

    OT: Other Income Plays

    DNP is a closed end fund that pays 7.5% monthly dividend. It is leveraged and trades at a premium--has for a long time. It is a utility income play and maybe a good alternative to some energy income plays. I'm think of selling HTE to buy DNP but not happy with the income drop. HTE says on their board that the POE will fall back into the 70% over time. Others have other non-energy income plays?

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    • ...the better way IMO is to build in closed end funds that are laon participating...these close end funds pay a nice dividend - 8 - 9 %...and their yields increase in a rising rate picks in this area include ETF, BGT, and EVF....but a little less on BGT since Gross recommended it in this weeks barrons...of course nice income off of EVV also...and CHY is a buy at this it just cleared its secondary and should appreciate over next 90 days ...

    • I'd add RVT, which has a policy of paying 9% quarterly based on a rolling average of NAV. It traded at a premium historically, but has dropped with the small caps and now trades closed to NAV or at a small discount. It is leveraged with a preferred, but has a substantial unrealized gain on the books, and the distribution is usually taxed as LTG and not as a dividend. The 10 year record is very good.

    • My favorite income plays right now:
      ACAS 10%
      THY/UN-TO 14.2%
      PMT/UN-TO 13.6%
      COS/UN-TO (ramping up)

      Danger in each case - they're stocks and they could pull back. THY, however, has just reduced its distribution and is at a 82% pay-out rate (POR), which is more than adequate. ACAS and Paramount have deep discounts on DRIP accounts.

    • John Hancock Bank and Thrift Oppty Fund---BTO. Regional banks, S&L's, bank holding cos., etc. Pays 10% of 12/31 NAV the following year. Paying .26/qtr--almost all of it LT cap gain--during 2006. Selling at a 9% discount. Very good record of LTCG payouts.

    • Regarding RNP, I forgot to mention that it sells for a discount of 6.7% of NAV.

    • RNP is a closed end fund of REITs and Preferreds. It has about 35% leverage, but uses swaps to fix the rates on 67% of the leverage. It yields about 8.8% and has a great track record.

    • I would never buy a CEF selling at a premium to NAV

      • 2 Replies to ic4x
      • That sounds like good advice. However, I own PTY for years, bought it at a discount. Now trades at a large premium, but has maintained its 9.5-10% dividend throughout, never reducing the dividend. Pimco runs these funds well. Also own PHK. My concern with these funds is not the premium, given the very satisfactory current yield. It is that there is about 30% leverage with preferreds which become less profitable as short term rates keep rising. So there is a risk of a small cut in the dividend. But that risk would be there even if there were no premium.

        In addition to some good non-energy income ideas already mentioned, I'll add NFJ (covered call fund pays about 11%), AINV (BDC pays over 10%), and BGF (combination of stock and bond, has risen lately, but still pays about 10.5% with a good cash cushion).

      • Lots of good ideas--thanks all. I also balk at buying CEFs at a premium but I don't want to buy a bond fund because with rates continuing to rise, there is the risk of principal loss. I will look into these ideas. Someone mentioned GEM and other bond funds tied to foreign banks but you could lose if the dollar rallies on. Hard to know what to do. Thats what makes SJT such a good play--solid income, tax advantages and an inflation hedge.

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