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Pimco High Income Fund Pimco Hi Message Board

  • keith_murray Dec 12, 2008 7:41 PM Flag

    I calculate tonight's (Fri) ARPS coverage at 195%

    Somebody else do the math and see what you come up with.

    My calculation assumes (1) 117,719,139 shares outstanding (from the Allianz website, as of 11-30), (2) tonight's posted NAV of 4.73, and (3)successful redemption of $63 million in ARPS each day of this past week, intent for which was announced in their press release of Nov. 19 .

    Now, they have also announced further ARPS redemption of $24.6 million each weekday next week.
    Assuming (1) that is accomplished, and ***BIG 'IF' HERE*** (2) assuming the NAV doesn't change from what it is tonight, I calculate the ARPS coverage would be at 204% this coming Tuesday night.

    And, unless there is payment of the postponed Nov. 3 dividend sometime next week, I calculate based on those same assumptions that the ARPS coverage next Friday night, Dec. 19, would be 221%.

    Somebody else crunch the numbers and see if you agree. Need to use 117.719 million outstanding shares, not a round 117, or your numbers may come out differently.

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    • jdfunnell Dec 17, 2008 10:58 AM Flag


    • This is off-topic for PHK, but fits right in with the above comment from jdfunnell on this thread so I am going to go ahead and post it.

      Dave, after your comment this week I couldn't help but think of you when the following comment showed up on the NLY board this morning (ha!):

      "Time for Annaly to lever this puppy back up into the teens."

    • No Dave I haven't been in NLY for. . . maybe 5 years. It's been so long I don't show it on my Quicken files and to get the exact time I would have go to go back to archives in the closet, which I won't. Just as NLY was getting into payout troubles several years ago, I got out of it. Amazingly, did quite well for a few years after that with TMA, and got out there when it was coming down, but still north of 20 dollars and was just horrified on what happened with TMA thereafter (now delisted, as it was down to like 27 cents even after a 1-for-10 reverse split).

      Back to NLY for a moment, Dave. While I haven't been in it for years, I have been following it of late and very curious what was/is going to happen in their December quarter, which is why I have been interloping on their board. Some of the comments on the NLY version of the "Guess The Dividend" thread have been of the sense that management has gotten some religion in the leverage of late, but I haven't delved much deeper into that.

    • Monday night I come up with 197.9%! Getting there:)

    • Your numbers look correct. I am including a little arithmatic that may give some insight into the dividends that might be avaialable for common shreholders after paydown of the preferred.

      Assets avaialable after preferred paydown:

      *From Preferred Stock ($900 million minus paydown of $438,000,000).........$452,000,000
      *From Assets,common-11/30 State.. 562,100,000

      Total........... $1,042,000,000

      Total Assets available to pay common and preferred dividends as of 9/30/08 (when the fund was earning at just about a break-even rate to pay these dividends)...$1,896,000,000
      Decrease in Assets..$ 852,000,000

      This is a decrease in assets of 44.937 per cent. 100 per cent minus 44.937 per cent would qual 55.063 per cent (assets remaining to pay dividends). As a first very rough approximation, let´s apply this latter number to the current dividend: .55063 X $1.4625 =.808296. Of course the 11/30 report shows cash and equivalents of 13 per cent. So let´s increase the the .55063 by .13 to get .68063. So .68063 X $1.4925=.99542. There could be even more to gain if we assume that sale of higher grade securities nets a lot more that sale of junk. At any rate, maybe a buck plus could be available to pay the new common dividend.

      I may have overlooked something or fouled up elsewhere in this somewhat oversimplified analysis. Feel free to shoot holes in it. I´m just as interested in ferreting out the future as anyone else.


      • 3 Replies to jackier929
      • jdfunnell Dec 14, 2008 3:32 PM Flag

        I think you overlooked that a large portion of the decrease in assets is the drop in market value of the bonds held. But that did not impact the coupon, which is what matters in the dividend.........Dave

      • Jack:

        The picky, piddly stuff first. 900 - 438 = 462, not 452.

        Add 462 to your number of 562.1 and I come up with 1024.1, not 1042.

        Those corrections don't make a material difference in your dividend prediction, though.

        I guess I do wonder why you add the cash and cash equivalents back in to 11/30 numbers to get a higher number of assets available to pay the dividend. That cash can't be earning much interest, and they have to have interest and dividends coming in to pay dividends out, no? Maybe I am missing something here, so if I am, clarify.

        Also, there were posts on this board yesterday about switching to what I took to be slightly more secure investments. While good for stability, couldn't that reduce their income with which they could turn around and pay dividends.

        So you say a buck a year (8.3 cents a month) and I wonder maybe 75-80 cents (roughly 6.5 cents a month) going forward (after the postponed one of .121875 they are still expected to pay).

        What do others who have worked through Jack's math think?


      • I did the same calculations, but with numbers more recent than 9/30 and got basically 30% reduction of dividend to $0.09, or $1.08 annualized. Pretty similar scenario.

    • I had come up with the same 221% pro forma coverage figure assuming current NAV and completion of intended ARPS redemptions.

    • Plugging the numbers you used into my spreadsheet says that after all announced ARPS redemptions, coverage = 220.5%

    • what dividend would you estimate once the ARP is paid down?

    • jdfunnell Dec 12, 2008 8:05 PM Flag

      I won't redo the numbers, since they look OK as is.

      You seem to be adding the declared-unpaid dividend into the NAV. Are you sure that's correct?

      I doubt there is any "if" as to the further redemption of the ARPS.

      I'd guess that within 7 days we hear about further dividends.

      Why is your sentiment "sell"?.......Dave

      • 1 Reply to jdfunnell
      • There has been talk on this forum ever since the postponement issue arose that (1)investment revenues, such as dividends and interest, continued to come in to the fund <that part is pretty obvious>, and (2) that since that was revenue the fund had received and was sitting in a pot, that said money was figured into the NAV. That was even offered as a reason why the NAV seemed to be rising inexplicably a few weeks back, at about the same time the dividend was put off. So I accepted that unpaid dividends are sitting in the NAV pot until paid as a "given," as it only made sense to me. But no, to answer your question I can't say I am certain.

        I do believe -- but won't swear to it -- that in past months when they did pay dividends, the NAV would drop after the dividend date. Can't remember if that was the ex- or the payment-date, but I do think I remember it dropping.

        On the next subject, my opinion is very similar to yours. My guess is that there will be an announcement of payment of the declared but unpaid dividend sometime between next Tuesday and Friday nights, and that said announcement will either be accompanied by declaration of another dividend (which may cover two months). If not declared simultaneously with payment announcement of the previous div., I believe such a declaration will follow no later than Christmas.

        Finally, my reason for the "sell" sentiment which I have had since late October comes, ironically, from one argument in your well-reasoned "buy sentiment" post you made last night. Specifically, that the only reason folks are in funds like this is for the div. And, I would add, the REGULAR div.

        I am retired and while I am not living close to "hand to mouth," I do count on a regular income stream.

        PHK got 'irregular' on me, so I sold it and bought a similar-purpose CEF that seemed less 'constipated.' While that other fund's price performance has been less than stellar since I did that, it has certainly beaten PHK's, as people like me sold. And to date, my new fund has paid its dividend, though even with it I get nervous since it has some ARPS exposure too.

        Now, as they say on the infomercials, "but wait! there's more!"

        I don't feel PHK's shareholder communications are very good. There is a lot of uncertainty over what they did and will do. Only one of several examples would be not posting a further press release after the Friday, Oct. 31, close and have shareholders find that now-postponed dividend in their brokerage accounts over the weekend, only to formally announce the postponement on Nov. 3, and have shareholders figure out on their own that what their brokerages were already showing would soon disappear.

        Contrast that with the conference calls that PHT has.

        Also, while the 20 - 25% yield you wrote about as reason for "buy"ing last night sounds attractive for PHK, contrast that to a nonleveraged high-yield CEF like MHY, which four times a year announces its distributions three months in advance, and which, by the way, is paying a 17.3% yield as of tonight, without any leverage I can see.

        In sum, Dave, the reason for my 'sell' sentiment on PHK is that I feel I was burned, but even more because I feel "there are other fish in the sea." At least one little fishy communicates better, and another little fishy has almost as much meat on its unleveraged fishbones :)

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