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PCQ: Don't Pull A Muscle While Stretching For Yield

Published Tue, 09 Jul 2019 16:43:31 -0400 on Seeking Alpha

Main Thesis
The purpose of this article is to evaluate the PIMCO California Municipal Income Fund (PCQ) as an investment option at its current market price. This is a fund I have favored for some time, and investors have been reaping double-digit rewards as 2019 has progressed. This is due to strong demand for municipal (muni) debt, particularly in high-tax states, such as California. While investors have been drawn to muni debt in most high-tax states, Californians have also benefited from a stronger financial backdrop, with the government reporting a budget surplus as well as rising tax rolls and a commitment to apply funds to long-term obligations. PCQ has also benefited from high UNII reserves, which allowed the fund to maintain its stated income level, even when other PIMCO CEFs faced distribution cuts earlier this year.
However, despite this positive backdrop, there are some attributes that concern me. Not surprisingly, the primary one is the rising cost of ownership, with the fund's premium to NAV approaching the 40% mark. Not only is this worryingly high on the surface, but it is also especially concerning when you consider PCQ is the most expensive PIMCO CEF available right now (in terms of premium to NAV), and it is markedly more expensive than the other CEFs holding California muni debt. This makes me question how much longer PCQ can maintain this lofty price. Furthermore, while PCQ has a good track record when it comes to paying its current distribution rate, the... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
PIMCO CALIFORNIA MUNICIPAL INCOME FUND III 10.93   0.0 0.00 0.00 4.45

PIMCO CALIFORNIA MUNICIPAL INCOME FUND III - PZC
PIMCO CALIFORNIA MUNICIPAL INCOME FUND III - PZC  


Older articles featuring Pimco California Municipal Income Fund Iii (PZC):
Weekly Review: Municipal Bond CEFs - Dividend Cut For Most Of PIMCO Funds
Tax-Free Yields And Capital Gains With Single State Municipal Bond CEFs
Weekly Review: Municipal Bond CEFs - PCQ Announced Unchanged Dividend
Weekly Review: Municipal Bond CEFs - Dividend Cuts For Several PIMCO Funds
Yield Hunter CEF Report April 2019: Distribution Cuts Finally Plague PIMCO
Dealing With A Dividend Cut In Your CEF Portfolio
Weekly Fund Wrap: Monday Night Dividend Massacre
Paying Heed To Dividend Sustainability: CEF Weekly Update
PMF, PCQ, PNF, PML, PCK, PNI, PMX, PZC and PYN Declare Monthly Common Share Income Dividends
PMF, PCQ, PNF, PML, PCK, PNI, PMX, PZC, and PYN Declare Monthly Common Share Income Dividends

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