PIMCO CEF distributions

[retiredat48]

Apr 13, 2023 23:47:24 GMT Chahta said:

steelpony10 , rhythmmethod , I get it since I own PTY. My only point was in January 2020 one could have paid $33 for PDI. Since then it has yielded about $6. Today the price is about $18. That is a long way to go to recover. When we talk about "spend down" investors we overlook the "drawn down" investors, which really is spend down too. The poor guy that paid $33 and is spending his $6 in yield may never see his principal again. I am lucky because I am not using the PTY yield and will recover any cost before I need it plus pump up the income.

Well, for starters, when PDI was at $33, the premium was HUGE...no?  Like 30+%.  So who is this person investing in a cef with a 30+% premium.

Yes, many may have reinvested dividends at this price, but few were posting about major buys at $33.  Most were buying PCI then, at far  lower premiums, if any buying going on at all.

R48

[steelpony10]

Apr 13, 2023 23:47:24 GMT Chahta said:

steelpony10 , rhythmmethod , I get it since I own PTY. My only point was in January 2020 one could have paid $33 for PDI. Since then it has yielded about $6. Today the price is about $18. That is a long way to go to recover. When we talk about "spend down" investors we overlook the "drawn down" investors, which really is spend down too. The poor guy that paid $33 and is spending his $6 in yield may never see his principal again. I am lucky because I am not using the PTY yield and will recover any cost before I need it plus pump up the income.

         The OP is about PDI. Spend down is about values, income investing is about cash flow. Two different investing techniques. I don’t care if the distributions vary. I love it when values tank. If the price of PDI doubles I don’t care either. I’m loading up on everything at this time with excess income to needs for what now may be at least another 2-4 years. I’m not passing up 12-14%+ income to sit on my hands watching VTI grow weeds, VWAHX not keep up with a 5% inflation rate and cash degrade to less then zero.

          So if the poor guy added an equal share amount now he’d capture an 11% payout. That’s how I see it. That’s only 2 years later. I call that a real lucky and an unusually quick opportunity (I waited from 2009-10 to 2020. It works like that.

           As long as PDI’s distribution rate is above the current inflation rate no purchasing power is being lost. What can match that now? Managers manage.

           

[mnfish]

Apr 14, 2023 0:42:50 GMT retiredat48 said:

Well, for starters, when PDI was at $33, the premium was HUGE...no?  Like 30+%.  So who is this person investing in a cef with a 30+% premium.

PDI has never traded at a 30% premium. At its high market price of $33.49 in Sep 2018 the premium was 15% and in Jan 2020 it was 20%. 

Fidelity - "Again, when investing in CEFs, discounts and premiums don't ultimately matter. What matters is your cost basis and the subsequent total return."

[rhythmmethod]

Apr 13, 2023 23:47:24 GMT Chahta said:

steelpony10 , rhythmmethod , I get it since I own PTY. My only point was in January 2020 one could have paid $33 for PDI. Since then it has yielded about $6. Today the price is about $18. That is a long way to go to recover. When we talk about "spend down" investors we overlook the "drawn down" investors, which really is spend down too. The poor guy that paid $33 and is spending his $6 in yield may never see his principal again. I am lucky because I am not using the PTY yield and will recover any cost before I need it plus pump up the income.

Of course, timing is important. The same could be said for any investment. If I was unlucky (or unknowing) enough to buy PDI at $33 and was a committed investor, I'd buy as it goes lower. (sorry retiredat48 , - I'll call it compelling value). It isn't binary, IMO. I also own other widgets that are counter to PDI as well. I want to own CEFs for income, trade around the edges, or not. As circumstances dictate, I collect the income and either spend, reinvest, or invest in other vehicles. I'm less concerned about the total return on my income vehicles. However, the total return for my CEF stable is pretty decent as I look at it. Good investing to you!

[retiredat48]

Apr 14, 2023 13:28:37 GMT mnfish said:

Apr 14, 2023 0:42:50 GMT retiredat48 said:

Well, for starters, when PDI was at $33, the premium was HUGE...no?  Like 30+%.  So who is this person investing in a cef with a 30+% premium.

PDI has never traded at a 30% premium. At its high market price of $33.49 in Sep 2018 the premium was 15% and in Jan 2020 it was 20%. 

Fidelity - "Again, when investing in CEFs, discounts and premiums don't ultimately matter. What matters is your cost basis and the subsequent total return."

OK...I'm posting from recollection.  That is, I recall PDI having very high premiums at times; most posters then (including me) were buying the PCI's of the world...similar investments w/o large or meaningful premiums.  

One is cautioned against paying large premiums for CEFs, in the CEF 101 investing textbooks.

R48

[steelpony10]

        We invested in PDI from inception. We also held PCI and PKO which were later merged into PDI. I’ve added to PDI during Covid and in 2022. Check the chart on that and compare that to today. It looks like another but small dive so we keep adding.

         As part of my learning process (mistakes) and people have posted on this, shares might run up trying to capture special dividends at the end of the year. Using Chahta ’s example, PDI paid January’s distribution in 12/19. Notice past years’ pattern? Maybe that bad break drove the share price even higher.

          I learned to wait and invest in the first and second quarter up to May after most distribution cuts are usually announced unless there’s an unexpected shock to the economic system beyond that during the year. When my 8-10% CEF’s all go beyond 10% (lose value) I start adding.

[sam]

@fpajerski,steelpony10,ECE Prof,richardsok,xray,retiredat48,marpro,johnsmith,rumi,habsui,

Does anyone has any insight or suggestion why PDI is underperforming HYG in last month? Junk bonds price/yield or Junk bond spread over Treasuries are good market sentiment indicator. HYG even in current market rout maintained its 200 SMA and currently trading above 20, 50 and 200 SMA. Is it cost of leverage hurting fund NAV?

In case of PDI both price and NAV are declining. www.cefconnect.com/fund/PDI

[retiredat48]

sam ,...for starters: LEVERAGE...using borrowed money. HYG is not levered.

The loss differences come from different types of assets held.

R48

[steelpony10]

sam ,

       Ditto retiredat48 , PDI has 40%+ leverage.

       You have to have faith in management. PIMCO managers are recognized as tops in this area. They get the best deals from banks because they are seen as a good loan risk. 

        My faith has limits though. Excess income to needs cash flow can be used to manage varying distributions, you can add more if you want to stay on target. Maybe even subtract if payouts get higher.

        We just keep our CEF cash flow at around our target amount which I check every year to see if it still is a valid number to delay spend down under normal conditions to about age 90. Also part of maintaining a target amount is to reign in greed and controlling risk as we age. 👍

[sam]

Thanks

My understanding is Leverage hurts on the way down but leverage helps on the way up. HYG (junk bonds) and Treasuries are holding up. PDI is most cooperate bonds and asset back loans. I understand they are not same. I was using HYG as proxy and correlation between PDI vs HYG or PDI vs SPY is quite high.

www.portfoliovisualizer.com/asset-correlations

[yogibearbull]

Leverage of PDI can be seen in several ways.

Debt/Gross Assets 0.4173, or 41.73%; that is the STATED leverage and the regulatory limits are specified as such. This is quite understated.

Debt/Net Assets 0.7161, or 71.61%; that is the leverage experienced by PDI holders

Also Gross Assets/Net Assets 1.7161, so 1.7161x leverage.

www.cefconnect.com/fund/PDI

[sam]

Apr 15, 2023 15:38:35 GMT yogibearbull said:

Leverage of PDI can be seen in several ways.

Debt/Gross Assets 0.4173, or 41.73%; that is the STATED leverage and the regulatory limits are specified as such. This is quite understated.

Debt/Net Assets 0.7161, or 71.61%; that is the leverage experienced by PDI holders

Also Gross Assets/Net Assets 1.7161, so 1.7161x leverage.

www.cefconnect.com/fund/PDI

yogibearbull , Thanks

[xray]

retiredat48,steelpony10,mnfish,rhythmmethod,sam,yogibearbull,

As of 11:59pm ET April 15th, 2023
Filing
Date Transaction
Date Insider Name Ownership
Type Securities Nature of transaction Volume or Value Price

Apr 14/23 Apr 14/23 Roman Emmanuel Direct Ownership COMMON SHARES P - Open market or private purchase Footnote and/or Remark 18,774 $12.79
Apr 14/23 Apr 13/23 Roman Emmanuel Direct Ownership COMMON SHARES P - Open market or private purchase Footnote and/or Remark 58,589 $12.84
Apr 14/23 Apr 12/23 Roman Emmanuel Direct Ownership COMMON SHARES P - Open market or private purchase Footnote and/or Remark 22,637 $12.76

-------------------------

Comment:

 PDO closed @ 12.73 COB Friday....

Live Long and Prosper....

[Chahta]

Apr 14, 2023 0:42:50 GMT retiredat48 said:

Apr 13, 2023 23:47:24 GMT Chahta said:

steelpony10 , rhythmmethod , I get it since I own PTY. My only point was in January 2020 one could have paid $33 for PDI. Since then it has yielded about $6. Today the price is about $18. That is a long way to go to recover. When we talk about "spend down" investors we overlook the "drawn down" investors, which really is spend down too. The poor guy that paid $33 and is spending his $6 in yield may never see his principal again. I am lucky because I am not using the PTY yield and will recover any cost before I need it plus pump up the income.

Well, for starters, when PDI was at $33, the premium was HUGE...no?  Like 30+%.  So who is this person investing in a cef with a 30+% premium.

Yes, many may have reinvested dividends at this price, but few were posting about major buys at $33.  Most were buying PCI then, at far  lower premiums, if any buying going on at all.

R48

Someone must have if PDI closed at $33.40 on 2/10/20. 1m shares changed hands.

[Chahta]

Again, my point is not to criticize someone's method of investing. I only point out that "spend down" or "draw down" can be experienced in different ways.

[Deleted]

For those with SA access, recent days have seen Dick having very educational non-political engagements with other knowledgeable posters which are presenting CEF (primarily PIMCO) financial actions and definitions and opinions exceeding my understanding. And refreshing is seeing poster differences being resolved in a respectful manner, not a trolling one.


see seekingalpha.com/user/52216490 And I note that not all his comments are picked up via this, perhaps just one per thread.


--- Frank

[mnfish]

Apr 17, 2023 5:12:53 GMT @fpajerski said:

For those with SA access, recent days have seen Dick having very educational non-political engagements with other knowledgeable posters which are presenting CEF (primarily PIMCO) financial actions and definitions and opinions exceeding my understanding. And refreshing is seeing poster differences being resolved in a respectful manner, not a trolling one.


see seekingalpha.com/user/52216490 And I note that not all his comments are picked up via this, perhaps just one per thread.


--- Frank

Thanks for posting. It was fun to read Dick's posts and his sharp wit again. 

[retiredat48]

Apr 17, 2023 5:12:53 GMT @fpajerski said:

For those with SA access, recent days have seen Dick having very educational non-political engagements with other knowledgeable posters which are presenting CEF (primarily PIMCO) financial actions and definitions and opinions exceeding my understanding. And refreshing is seeing poster differences being resolved in a respectful manner, not a trolling one.


see seekingalpha.com/user/52216490 And I note that not all his comments are picked up via this, perhaps just one per thread.


--- Frank

@fpajerski,Thanks Frank...can you please keep us periodically updated to Dick's posts, by simply posting a link?

Will the current link always work?

R48

[johnsmith]

That link should work. I keep it bookmarked to see Dick's thoughts on CEFs.

[gman57]

March UNII report is out

[richardsok]

Yeah, that looks like Mar 1, gman. We're still waiting on Apr 1st. Should be out this week.

FWIW, picked up some good size insider buys on PDO. Emmanuel Roman (?) increased his holdings from 192,000 sh to 270,000sh.

- - - - - -

Good to see yr post, rod.   Long time no c.

[johnsmith]

So everyone has had this question, how come they have 0 income for the last few months. Dick Cod recently posted on the SeekingA boards :

I might not get this right, here goes anyways:

PDI has RR where they are paying SOFR + 4.5% and getting Fixed Rates 2% - This is a notional amount of 1 Billion Dollars. So they have taken current income and given it away - therefore the no income.

I think what he is saying is that PIMCO expects interest rates to change in the future and this should have a beneficial effect on the NAV.

In exchange for this RR (Reverse Repo) they have around 15.7% in cash.

The intricacies of this are beyond me, so I might have it wrong, hope it makes sense to some people.

[gman57]

Re: UNII report -- As of March 31st...you're not going to see "as of April 30" until mid May sometime.

[retiredat48]

Apr 18, 2023 2:47:38 GMT johnsmith said:

So everyone has had this question, how come they have 0 income for the last few months. Dick Cod recently posted on the SeekingA boards :

I might not get this right, here goes anyways:

PDI has RR where they are paying SOFR + 4.5% and getting Fixed Rates 2% - This is a notional amount of 1 Billion Dollars. So they have taken current income and given it away - therefore the no income.

I think what he is saying is that PIMCO expects interest rates to change in the future and this should have a beneficial effect on the NAV.

In exchange for this RR (Reverse Repo) they have around 15.7% in cash.

The intricacies of this are beyond me, so I might have it wrong, hope it makes sense to some people.

But giving away this income is done in swaps whereby the giver receives capital gains in the future...like a bond that matures and one swapped it at a discount.  PIMCO may be getting these cap gains in December, and can thus make distributions thereof.  Note I do not run PIMCO and have no direct knowledge of this...just gleaning what posters/income services are saying.  The logical part is PIMCO income does not go quickly to zero, w/o an offsetting gain somewhere/sometime.

R48

[newtecher]

Apr 18, 2023 2:47:38 GMT johnsmith said:

So everyone has had this question, how come they have 0 income for the last few months. Dick Cod recently posted on the SeekingA boards :



PDI has RR where they are paying SOFR + 4.5% and getting Fixed Rates 2% - This is a notional amount of 1 Billion Dollars. So they have taken current income and given it away - therefore the no income.

I think what he is saying is that PIMCO expects interest rates to change in the future and this should have a beneficial effect on the NAV.

In exchange for this RR (Reverse Repo) they have around 15.7% in cash.

This is a confusing description. Paying "paying SOFR + 4.5% and getting Fixed Rates 2%" sound like an interest rate swap rather than a reverse repo. PIMCO should get a lot of money for such terms (I would love someone to pay me overnight rate +4.5 and pay back fixed 2% but no one word give it to me for free). If they have an interest rate swap like this, then one thing PIMCO is doing betting on short term rates declining soon, which would reduce their payments (and has not happened yet). They are also getting a lot of cash now in exchange for paying about 1B* (SOFR + 4.5% - 2%)=1B* (4.8% + 4.5% - 2%) = 48 million per year or $4 million per month. This is helpful if they think they can use the cash to buy bond that will grow in price.

By they way, I do not see such entries on PDI's holdings on PIMCO's website, so taking Dick's words at face value.

[newtecher]

OK, I found the quote on SA (https://seekingalpha.com/article/4594419-pdi-cef-profit-from-coming-recession-reiterate-hold). He was not talking about reverse repos. Also, he said interest rate swaps were to pay SOFR (>4.5% right now) and receive fixed 2%. Here is the key quote: "This swap positioning is the rough equivalent of buying intermediate Treasurys at negative carry --- financing them above current yield. The position will increase in value if/as rates drop in the future, driving NAV." I wrote as much in my post above.

[archer]

Apr 18, 2023 2:47:38 GMT johnsmith said:

So everyone has had this question, how come they have 0 income for the last few months. Dick Cod recently posted on the SeekingA boards :

I might not get this right, here goes anyways:

PDI has RR where they are paying SOFR + 4.5% and getting Fixed Rates 2% - This is a notional amount of 1 Billion Dollars. So they have taken current income and given it away - therefore the no income.

I think what he is saying is that PIMCO expects interest rates to change in the future and this should have a beneficial effect on the NAV.

In exchange for this RR (Reverse Repo) they have around 15.7% in cash.

The intricacies of this are beyond me, so I might have it wrong, hope it makes sense to some people.

What is meant by "no income" I have been getting income from PDI every month.

[richardsok]

"If they have an interest rate swap like this, then one thing PIMCO is doing betting on short term rates declining soon, which would reduce their payments (and has not happened yet)."

"The position will increase in value if/as rates drop in the future, driving NAV."

- - - -

Thanks for your insights, guys. These are bets I'm not willing to accept. Both the fundamentals (as I vaguely understand them) and the technicals that I can clearly see are generally weak for most Pimco CEFs. Will continue to reduce my positions, perhaps to zero.

[johnsmith]

look at the UNII report.

archer,

[steelpony10]

archer ,

         Mostly it’s the UNII trend whatever that means. Define trend? After looking at this simple chart it looks to me like I’d be chasing a ghost.

          Distributions vary, PIMCO will adjust the distribution if needed. If anyone spends down or is worried about values or wouldn’t be satisfied with a distribution rate less then 14-15% currently then go back to cash, 3% bonds and equities where values and payouts apparently never vary. Which may be true. Mine have provided basically zip for awhile. Lol.

          www.nuveen.com/en-us/global/-/media/nuveen/retail/thinking/closed-end-funds/understanding-unii-balances/5632_0219_understanding-unii_chart-1_v2_1023_1x.ashx?sc_lang=en&hash=B538E7C2475241C115A667DCA8AE9649

          I still separate high premiums from UNII and NAV. I prefer to look at premiums as a report card on managements ability to manage distributions in a manner that benefits investors similar to high PE’s because there is confidence in management to continue to drive earnings up over time. We all have to adjust to economic disruptions of unknown lengths. We may cut back and so might they.