Yeah, I see how that chart brings up questions.
The way I see it is that each month they're buying large companies and writing calls on them. They generate cash in that way and that would be income. Also, I imagine they let some of their covered calls be exercised, calling some of their shares way, which brings them cash but might be classified as a long-term gain. So, I think they're going to generate 10% in cash one way or another between call premiums and allowing covered calls to exercise. But, I imagine that where they're using the premium cash or covered call exercising cash is going to determine what the chart says between short-term income and capital gains.
That being said, to me, the true measure of whether they're doing well enough to pay out 10% in dividends is how the stock market is doing in addition to their call premiums. If the stock market is even or up, they should have enough to pay it that year. If the stock market is down, they may be reaching into their NAV to pay it.
But, I like having a cef at a discount paying a large yield because even if it's above earnings in a year, it will help to reduce the discount over a long-term.
Thanks,
Grant |
