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Are CEF Investors Getting Suckered Into High Yields?

Published Tue, 06 Sep 2016 14:39:03 -0400 on Seeking Alpha

Closed-end funds, or CEFs, continue to be an alluring income product for investors, with fixed-income yields continuing their roughly 35 year death spiral. The ability to purchase assets at a discount and buy into typically cheap added leverage can add up to serious comparative value for both stock and bond investors.
Unfortunately, the cost of entry is usually quite high when compared to an ETF with a similar strategy. Pick a fund with sub par, overpriced management and the attractive discount you thought you were getting might turn out to be more than well deserved.
"Sucker" Defined
Fellow REIT writer Brad Thomas coined the term "sucker yield" a few years ago to describe the lofty yields endemic in the mREIT space. Basically an offshoot of the notion that "if something is too good to be true, it usually is," Brad's definition typically applies to high-yield companies with erratic payouts, deemed unsustainable payouts, as well payouts that can be seen as demonstrably uncovered.
The term can be seen as highly subjective in my view. I'd argue that one shouldn't necessarily discount "sucker-type" situations so long as the risks and nuances behind the payout are clearly understood. Valuation, as always, has to be part of the analytical mix. At times it may make more sense to opt for a weak-dividend security trading at a handsome, dirt-cheap value as opposed to a more durable yield trading in the nose-bleed valuation... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
H&Q HEALTHCARE INVESTORS 18.84   0.0 0.00 1.82 9.71
WELLS FARGO ADV MULTI-SECTOR INCOME FUND 12.30   0.0 0.00 0.00 9.61
H&Q LIFE SCIENCES INVESTORS 15.62   0.0 0.00 0.00 9.43
EATON VANCE TAX-MANAGED BUY-WRITE OPP FUND 14.76   0.0 0.00 0.00 9.00
EATON VANCE ENHANCED EQUITY INCOME FUND II 16.99   0.0 0.00 0.00 7.02
BLACKROCK MUNI INTERMEDIATE DURATION FUND 14.29   0.0 0.00 0.00 3.72
BOULDER GROWTH & INCOME FUND 11.20   0.0 0.00 0.00 3.65
YUM! BRANDS 113.27   27.0 4.19 1.68 1.46
BERKSHIRE HATHAWAY B 214.20   0.0 0.00 0.00 0.00

H&Q HEALTHCARE INVESTORS - HQH
H&Q HEALTHCARE INVESTORS - HQH  


Older articles featuring H&q Healthcare Investors (HQH):
Pace Of Dividend Cuts Accelerates In February 2019
High Yield Strategy Fails Again
Dividends By The Numbers For May 2018
Share In Healthcare And Biotech Gains With A 9.5% Yield
High-Yield Investing: Strategy For 2017, Risks And Sectors Set To Outperform
Retirement Income: High-Yield, Sustainable Capital CEF Portfolio Continues To Shine At One Year
Best 'High Yield Sectors' For Income And Growth - To Consider Today
An In-Depth Look At The Extended Valuation Of Defensive And Income-Yielding Equity Sectors
Retirement Security Amid Global Crises: The Problem Of Cutting Risk And Maintaining Yield
Stocks Trading Ex-Dividend on 5/20/2016

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