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PIMCO High Income Fund Message Board

  • whistlerndark whistlerndark Mar 24, 2009 3:38 PM Flag

    Distribution cut coming

    This will be the last $.12 dividend distribution. The reason is simple enough. For management to carry out its de-leveraging it must come up with $170 mn. In order to do this it has to sell assets. There are two distinctly bad things must result. One, shareholders no longer get the dividend boost benefit of that disappeared leverage. Two, the assets required to be sold in order to de-lever the portfolio no longer exist and therefore the portfolio's dividend distribution ability is further undercut. What this de-leveraging amounts to is that in order to avoid distributing more than what the portfolio generates, management will be forced to cut distributions going forward to at a minimum, $.08 per share. Who wants to hold this with this coming up?

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    • This will be the last $.12 dividend distribution. The reason is simple enough. For management to carry out its de-leveraging it must come up with $170 mn. In order to do this it has to sell assets. There are two distinctly bad things must result. One, shareholders no longer get the dividend boost benefit of that disappeared leverage. Two, the assets required to be sold in order to de-lever the portfolio no longer exist and therefore the portfolio's dividend distribution ability is further undercut. What this de-leveraging amounts to is that in order to avoid distributing more than what the portfolio generates, management will be forced to cut distributions going forward to at a minimum, $.08 per share. Who wants to hold this with this coming up?

      REPLY: Ummmmm...don't quit your day job and don't try to start a newsletter if you are currently laid off.

      Have a nice weekend.

      P.S. Any more brilliant predictions so I can go full margin the opposite way?

    • That is why a sound strategy is going long a peer fund while shorting PHK. There is not much damage income wise and the difference in NAv's will eventually even out or narrow significantly to make it a great trade (which it has been since mid Feb.2009 and Oct/Nov 2008)

    • Yes that was my point, CEF's do not stay at 75% premiums. Either the NAV needs to come up or the market price could fall. But I would not short it either since you would be paying the dividend.

    • I did check the chart; what I saw is that by the following summer, the fund had lost 2/3 of its value; is that your point??

    • Do you know what the pay out ratio is? It seems this fund may be paying out more than it earns to please share holders and keep the market price up. When a bond fund income distributions significantly exceed net earnings, it is essentially cannibalizing assets in order to maintain shareholder distributions. Could this be why the NAV keeps dropping? (75% premium now. according to Allianz web site) I am not short but did sell some shares on the ex-dividend date.

    • nolongeretiring,
      please tell me what in the world did you just say. thats a long disertation for not saying anything.
      tell me in plain laungage,is phk going to cut their dividend this coming month.
      tool
      good investing to all.

    • Capital gains are just about always distributed by funds like PHK to avoid a hefty tax, correct?

      How does that affect PHK's situation when the bond market recovers? Since PHK trades holdings so much (last I recall, 99% turnover on allianz website), when they book gains after a recovery (following big losses), do those become capital gains that must be distributed, or are they just written against the losses of the last year or two?

      It comes down to either big cap gains payouts and NAV that is stuck, or a recovery of NAV.

      I'm reasoning it has to allow for recovery in NAV without the tax penalty. Anyone have real info?

    • thank you for the warning. i've been a large holder since early 2004. having said that,how would you like to borrow some phk.
      tool
      good investing to all

    • tomnoddy_the_attercop tomnoddy_the_attercop Mar 25, 2009 10:56 PM Flag

      So instead of earning 25%, they will "only" earn 16%. Boo-fkn-hoo.

      And that is assuming they bought at today's closing price, and not at a lower one.

    • Gotta love these financial macho-men wannabes who like to post garbage after the stock goes against them. Or, in many cases it is someone who bought high and sold at the bottom, only to see it rise the day after they sold. Right? Sure I am.
      You can put that post with the one that forecasted a "handle" at $2 or some other BS. I'll just keep reinvesting the dividends and watch all of the daytrader idiots make their broker rich and themselves broke.

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