|
|
Post by anitya on Jan 22, 2024 17:44:58 GMT
PDI dividend cut, if happens, will not be for lack of available cash. Not only does PDI have the ATM issuances, many that invest in it because of its high dividends (actually, distributions) reinvest those dividends - fund reinvests dividends at up to 5% discount. So, some of what the fund pays with its left hand gets back in its right hand. Net, net, cash is never a problem for the fund. BTW, its shares are trading below IPO price ($25) when the fund raised, if my memory is correct, about $1B. Given its current aggregate share count, one can figure out how many shares were issued subsequent to IPO: ATM sales, reinvested dividends, and PCI merger.
If there is a desire to issue more shares ATM, a dividend cut may be counter intuitive for a fixed income CEF. (Unlike in fixed income CEF world, in equities, quite often a poorly performing, high dividend stock price actually perks up when there is a dividend cut, notwithstanding an initial negative reaction in price. Many dividend investors in equities in this forum know this phenomenon.)
PDI investor psychology is a bit complex.
|
|
|
|
Post by anitya on Jan 22, 2024 18:10:41 GMT
Is PDI still issuing new stock at the market, which of course helps existing shareholders when it is trading at a premium? Is it possible some of the aggregate NAV increase is from new issuances? Yes, and it is a significant source of cash flow. ADS analytics wrote a piece on this over at SA dated Dec 13th. Here's a table he annotated from the PDI annual report dated June 30th 2023:
Proceeds from "at the market offerings" were 659 Million. The dividend drip program added another 91M. This exceeds the 545 M earned as NII. For reference distributions were 804 M, so the ATM share sale + NII more than covered the distribution. The 'leftover' 491M contributes to NAV, and presumably was invested to grow future income to help fund distributions for the old shareholders as well as those holding the 38M new shares (~13% of total). PIMCO is free to increase or decrease the number of shares they sell to suit their cash flow needs and to fund new investment opportunities.
These numbers cover July 2022 through June 2023. A period when NAV was decreasing. The decrease would likely have been worse without the 491M net increase in assets from the ATM program. Assuming that ATM sales + NII still exceed distributions, they would contribute to the recent rise in NAV. But I doubt the excess is enough to move the NAV needle compared to the effects of mark to market pricing of assets in anticipation of rate cuts.
It is simpler to look just at per share NAV changes. |
|
|
|
Post by anitya on Jan 22, 2024 21:45:25 GMT
rhythmmethod, "IMO, trading adds leverage on top of the existing leverage." Please say more. Why does trading add leverage? Thanks
|
|
|
|
Post by retiredat48 on Jan 22, 2024 22:57:02 GMT
Issuing new shares and using it to pay dividends has, in the long run, many similar features of some folks with names like Ponzi and Madoff. Also called "schemes."
R48
|
|
|
|
Post by keppelbay on Jan 23, 2024 0:28:22 GMT
Issuing new shares and using it to pay dividends has, in the long run, many similar features of some folks with names like Ponzi and Madoff. Also called "schemes." R48 Well... that's one way of looking at it. Another is that the premium to NAV is essentially 'extra cash', after the new NAV goes into buying new assets to support the increased distribution... |
|
|
|
Post by archer on Jan 23, 2024 0:43:15 GMT
Issuing new shares and using it to pay dividends has, in the long run, many similar features of some folks with names like Ponzi and Madoff. Also called "schemes." R48 Well... that's one way of looking at it. Another is that the premium to NAV is essentially 'extra cash', after the new NAV goes into buying new assets to support the increased distribution... How does the new NAV buy new assets? Assets under management are based on the combined value of those assets. Increasing shares just devalues the amount per share. Isn't it like how printing money decreases its value? |
|
|
|
Post by keppelbay on Jan 23, 2024 1:15:57 GMT
Well... that's one way of looking at it. Another is that the premium to NAV is essentially 'extra cash', after the new NAV goes into buying new assets to support the increased distribution... How does the new NAV buy new assets? Assets under management are based on the combined value of those assets. Increasing shares just devalues the amount per share. Isn't it like how printing money decreases its value? the shares are sold at market price when the price is at a premium to NAV. The fund gets cash in exchange for the new share equal to NAV + the premium. I was making the point that one thing they could do to avoid dilution was to use that cash buy one shares NAV worth of new assets for each share sold and use the extra cash equal to the premium for whatever they deem best. This is just speculation for illustration. I have no idea what they actually do. |
|
|
|
Post by anitya on Jan 23, 2024 1:22:45 GMT
Well... that's one way of looking at it. Another is that the premium to NAV is essentially 'extra cash', after the new NAV goes into buying new assets to support the increased distribution... How does the new NAV buy new assets? Assets under management are based on the combined value of those assets. Increasing shares just devalues the amount per share. Isn't it like how printing money decreases its value? It may be use of certain words loosely that is raising questions in your mind. To illustrate, when the NAV is $100, issue new shares at $115; if share count doubled, the new NAV is $107.5. Existing shareholders are enriched. If the manager has spotted opportunities in the market, now he has $115 cash he did not have before to invest in the new opportunities. Hopefully, your manager is issuing new shares in an up market or near bottom of a bear market and not as the market is going down or at the top of the market. Similarly, hopefully, you manager issuing shares when the stock is trading at a premium to NAV and not at a discount. I am sure you know all of the above. Edit: I see keppelbay responded to you as I was typing my post. |
|
|
|
Post by rhythmmethod on Jan 23, 2024 1:35:07 GMT
rhythmmethod , "IMO, trading adds leverage on top of the existing leverage." Please say more. Why does trading add leverage? Thanks I should have said that trading adds risk on top of leverage. I think that because these CEFs are black boxes, no matter how much the inner workings are analyzed or discussed. The plus/negative narrative of PIMCO stuff changes from day to day. Trading on these day-to-day changes adds more risk, IMO. I refer to it as a dog chasing tail syndrome. Either one trusts PIMCO to bat over 500, collect the income, and use it as you see fit, or leave them alone. This thesis is only my opinion and not a recommendation to others. Edit to add: Cape Cod, who went to 40 % cash less than ten days ago, re-bought positions (apparently at "slight opportunity cost"). FWIW ;-) |
|
|
|
Post by uncleharley on Jan 23, 2024 2:20:22 GMT
I would add that trading as well as leverage can add value as well as risk to ones portfolio. An individual investor has to assess their abilities to trade as well as their risk tolerance when putting together their investing strategy. I have often felt that the largest risk in a trade is the traders ability to pull it off.
|
|
|
|
Post by rhythmmethod on Jan 23, 2024 2:38:25 GMT
Absolutely, uncleharley. Risk and leverage work both ways and you have often proven to be able to thread the needle. Me, and a lot of others it seems, not so much! Keep rockin'! |
|
|
|
Post by FD1000 on Jan 23, 2024 12:52:45 GMT
Buffet . "If you don't have leverage, you don't get in trouble. That's the only way a smart person can go broke, basically. And I've always said, 'If you're smart, you don't need it; and if you're dumb, you shouldn't be using it.'"
|
|
|
|
Post by mnfish on Jan 23, 2024 13:05:27 GMT
On a brighter note, Wells Advisors has moved PTY, PCN, PDI, and PHK from Sunset/Sell to Watch Level III due to a change in their rating system.
Watch Level III is a rating that basically means Hold but the valuation and/or the distribution stability is not compelling at this time.
|
|
|
|
Post by retiredat48 on Feb 7, 2024 16:28:19 GMT
|
|
|
|
Post by keppelbay on Feb 7, 2024 17:02:02 GMT
PDI has been doing nicely at the NAV level, like a number of its sibs. Yield at NAV is still strong, but market price has been on a tear. The premium is now relatively high, pushing the yield at market price closer to the others.
premium yld @ NAV yld @ mkt
PDI 13% 15.3% 13.6% PDO 5.4% 12.6% 11.6%
PAXS -0.9% 12.97% 12.1%
It might be time to consider turining the drip off, and deploying the divs to other funds. Fwiw, I've just opened a starter position in AFT, a bank loan fund yielding 11.9% and trading at -8% vs NAV.
|
|
|
|
Post by Broozer on Feb 7, 2024 18:06:34 GMT
I've had PCI (then PDI) since July 2019. I've taken some of the income, last year I think I reinvested most of it. I could figure it out, but don't care that much.
I'm nearly back to being even again.
|
|
|
|
Post by retiredat48 on Feb 7, 2024 20:54:55 GMT
PDI has been doing nicely at the NAV level, like a number of its sibs. Yield at NAV is still strong, but market price has been on a tear. The premium is now relatively high, pushing the yield at market price closer to the others.
premium yld @ NAV yld @ mkt
PDI 13% 15.3% 13.6% PDO 5.4% 12.6% 11.6%
PAXS -0.9% 12.97% 12.1%
It might be time to consider turining the drip off, and deploying the divs to other funds. Fwiw, I've just opened a starter position in AFT, a bank loan fund yielding 11.9% and trading at -8% vs NAV.
Kep, I'm 50/50 about selling any. If things stabilize out, (and especially if no dividend is cut soon) I see all the PIMCO CEFs increasing their premium, with PDI easily hitting 20+%. Not historically unusual. R48 |
|
