If people are worried about NCV not making earnings to cover the dividend then why are they investing here? This fund is yielding 10% + and convertible bond offerings typically yield 4 - 5 %. As NCV's protfolio matures, they have to reinvest at these lower yields so it is obvious that as long as interest rates remain low, NCV's net investment income will slow. Really, what do you expect???
I have owned NCV for a long time, having bought shortly after IPO and added at additional points throughout the years, including shares added at $ 5.83 during the financial crisis. Those shares have already paid me $ 5.17 back in dividends.
I am always looking to add and IMO two things can happen in the future:
1. Interest rates will remain low for the forseeable future, in which case NCV's net investment income will slow, resulting in a dividend cut and the stock will likely have a negative reacition. At a yield of better than 10% some of the decrease is priced in. I will take advantage of any price drops to add to my core holdings and wait for interest rates to recover.
2. Interest rates will go up. When this happens NCV will be able to reinvest matured securities at higher interest rates, thus supporting the dividend.
The point is if you are surprised that a fund that yields 10 % and invests in securities that have been yielding 4 - 6% for a long time now, does not have net investment income to cover the dividend , you don't know what the f- you are doing and should not be in the market.
The trust owns an interest in the land on which the receive mineral rights. By my calculation 0.023 cents of the May distribution is from the land sale which means that without the land sale the trust's distribution would have decreased. See the press release for the land sale. I don't know how many acres were sold or what valuation that implies for unsold land, but the production decrease is worrisome IMO.
For years I have been beating the drum about HGT's decrease in production. Built a small position from $ 6.75 - $ 7.05. Sold 25% today at $ 9.81. Today's increase in distribution is primarily due to the land sale and daily production has fallen to 48,000 per day, a significant decrease from last month. This NG field is aging fast.
Earnings were good. Obviously .27 on NII line would be better than .26, however, this is a convertible fund therefore capital gains cannot be ignored as part of the return. In an up market the capital gains portion will bring back additional upside return to the shareholder. If this were a pure bond fund I would be more concerned about NII, but it's not, so we can't look at only NII.