Because there are severe tax consequences if PHK doesn't pay out what it earned during 2008.
"In order to avoid the imposition of federal tax at the fund level, a closed-end fund must meet IRS requirements for sources of income and diversification of portfolio holdings, and must distribute substantially all of its income and capital gains to shareholders annually."
Hey,,, Step back Jack... Just trying to get a handle on this... Look at IAR, dropped the dividend and even though the stock is earning money it dropped like a car falling off a Chappaquiddick bridge. Everyone says it has no value...
Pay no attention to cent_maker. He's partially wrong anyway. You see, contrary to cent_maker's comment, one can't sell shares at the NAV, only at market price.
Retained dividends do positively affect NAV, however, because PHK's market price is trading at a steep discount to NAV and does not necessarily track NAV, your market price is not necessarily benefiting the few pennies per share increase from retained dividends. In fact, as we've seen in recent months, the value of the underlying assets (bonds) may fall by so much that it eclipses any small boost given to the NAV by retained dividends.