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Templeton Emerging Markets Income Fund Message Board

  • mtnvalley3 mtnvalley3 Mar 25, 2003 11:14 PM Flag

    AWF at open?

    If you're not already in, it may be an idea to try to get some AWF at open (if it doesn't gap too much), as it should take a ride tomorrow.

    Close was 10.52. With new annual div total of 1.11, and peers SGL and TEI trading to a 8.75-9.5% yield (GHI still at 10.8%), it's not unreasonable to think AWF could run up 60c tomorrow, to a 10% yield...and STILL be at a discount to NAV (11.32 at close today).

    Sounds like they're confident in the increase sticking, too. From the release:

    "The $0.0925 per share dividend rate represents an increase of $0.01 per share from the Fund's previous $0.0825 monthly dividend rate. John D. Carifa, Chairman of the Fund, commented that, "the dividend increase is intended to align the Fund's monthly dividend with its current and projected earning power."

    My thanks to Bob W for bringing this one up a while back at 9.5x, as it wasn't on my radar at the time. I even bought some overweight last week at 10.28, but think I'll keep 'em.

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    • AWF is leveraged close to 10% I think.
      Thanks for this most informative discussion.
      Jon

    • > hmmmmmmmmm . while they got shellacked pretty good early on as they reduced from 21 to 9% as prices plunged , looks like they steadily bought back in as prices rose back up ........

      maybe they really have 'earned' that divvy increase without more risk ..... <

      Probably trading 'em based on the 28-DMA . . .



      :-)

    • OK....enough conjecture and real homework...

      here are Brazil % in AWF at month end since Brazil took a dive:

      AWF% Brazil C bond
      4/02 21.4% $80
      5/02 17.5 $74
      6/02 9.7% $62
      7/02 9.2% $52
      8/02 14.4% $62
      9/02 11.5% $48
      10/02 17.7% $58.5
      11/02 17.7% $61.2
      12/02 20.7% $66.2
      1/02 22.3 $69
      2/02 22.8% $74.7
      3/02 $79.5

      hmmmmmmmmm . while they got shellacked pretty good early on as they reduced from 21 to 9% as prices plunged , looks like they steadily bought back in as prices rose back up ........

      maybe they really have 'earned' that divvy increase without more risk .....

    • If u wanted to jack up the NAV, increasing dividends is not the way to do it since now 9 cents of NAV out the door every month instead of 8..

      AWF is in kind of an enviable position, they had huge capital gains in Brazilian bonds, now they have to decide whether to realize it by selling them (and possibly repurchasing cheaper later) or just holding onto them and collecting the coupons and hope bonds will remain steady or even go higher..

      Or they could take half the gains now, move the stop back to break even, so to speak, on the rest of the bonds, and give away some potential income and appreciation while locking in some of the gains

      Kind of like the dillema for those that bought AWF cheap last week..

    • It is interesting to compare TEI and AWF at cefa.com

      See h*tp://www.cefa.com/scripts/fundstat.asp?id=AWF&d=1 for AWF

      see http://www.cefa.com/scripts/fundstat.asp?id=TEI&d=1 for TEI

      A comparison:

      FUND _____________________AWF________TEI
      Turnover ____________________61% _____96%
      NAV Return last 12 months _ 17.49% ___8.28%

      Since neither fund is leveraged, looks like AWF just did better last year.

      For a 6-month comparison of the NAVs, see http://finance.yahoo.com/q?s=XTEIX&d=c&k=c3&c=xawfx&t=6m&l=on&z=m&q=b AWF is up 20%, TEI is up 12%

    • << Why wouldn'et a bond fund manager sell high priced bonds, pass on some cash in dividends, and hold some to buy back bonds later?

      Seems like it would be stupid to continue to buy most bonds at this point, and that it would be smart to sell bonds and wait for prices to drop.

      If a bond fund manager did that, then he could pay dividends and stay ahead of the curve on bond prices.
      timmuggs >>

      anyone who has does that in last 3 years has been anihilated because yields have just kept dropping (prices going higher) .

      a CEF manager who sells bonds loses the interest stream those bonds were paying to maintain future dividends as well as fact that
      paying out cash on hand instead of interest income is NAV out the door permananently .

      its a zero sum game : and any manager who sold bonds and sat on cash in past 3yrs has been killed since he was forced to buy back in at even higher prices (lower yields) .........

      and a manager who sits on cash getting 1% in CP or T-bills in a high yield EMG CEF is a manager who is quickly going to need to slash
      the dividend given the cashflow degredation .

    • Interesting discussion on AWF.

      But here is a question, sorry if this has been suggested already.

      Why wouldn'et a bond fund manager sell high priced bonds, pass on some cash in dividends, and hold some to buy back bonds later?

      Seems like it would be stupid to continue to buy most bonds at this point, and that it would be smart to sell bonds and wait for prices to drop.

      If a bond fund manager did that, then he could pay dividends and stay ahead of the curve on bond prices.
      timmuggs

    • > Bob ..... think about it ..... if all the bonds in your portfolio were giving a combined yield of say 11% a year ago and now at higher prices the same bonds yield 9% today , when they reinvest maturing bonds at 200bps lower yield , there is simply less dividend yield to go around on the whole portfolio....... its pure bond math .

      the statement above made by TEI jives with that harsh reality perfectly and is exactly what I would say as well ........ you can't squeeze blood from a stone and the harsh reality is that many bond CEF have cut divvies and many more to come as bonds mature and money gets reinvested into far lower yielding paper .....

      when someone like AWF is somehow able to increase its yield magicaly despite yields of what it owns going much lower , they are defying bond math (unless they increased risk) . <

      I understand the bond math. You are assuming that they are matching the yield on the stock per the yield on the underling portfolio. I am saying some of the gains in the portfolio come from interest income, some from cap. gains from buying and selling bonds, and the NAV (after adjusting for the dividends paid) reflects all of this.

      Assuming the dudes running the funds are truthful, (which is probably a stretch) they probably have different outlooks on how they see the NAV changing going forward. Perhaps the TEI guys are buy-and-holders and the AWF guys are traders.

    • << 'aligning the dividends to match the income' or something >>

      Bob ..... think about it ..... if all the bonds in your portfolio were giving a combined yield of say 11% a year ago and now at higher prices the same bonds yield 9% today , when they reinvest maturing bonds at 200bps lower yield , there is simply less dividend yield to go around on the whole portfolio....... its pure bond math .

      the statement above made by TEI jives with that harsh reality perfectly and is exactly what I would say as well ........ you can't squeeze blood from a stone and the harsh reality is that many bond CEF have cut divvies and many more to come as bonds mature and money gets reinvested into far lower yielding paper .....

      when someone like AWF is somehow able to increase its yield magicaly despite yields of what it owns going much lower , they are defying bond math (unless they increased risk) .

    • > sorry Bob but dividends require REAL CASH . either the bond interest covers this increased dividend or AWF has to liquidate bonds to pay a higher dividend absent same risk profile ... <

      They are getting income off of their bonds and bonds are coming due and they are getting principle back at various times. (I am assuming that they have a big collection of bonds at various maturity dates).

      > or are you suggesting that TEI slashed its dividend 20% (last cut was 3 cents back in 1994) despite much higher NAV because they want to "build NAV" .........? <

      Exactly. What they said they were doing is 'aligning the dividends to match the income' or something to that effect, but I don't trust 'em. If the NAV was shrinking, I could see that happening, but I think they just want to jack up the NAV to jack up their fee income.

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TEI
10.72+0.01(+0.09%)Jul 1 4:08 PMEDT