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Strategies & Market Trends : Dividend Investing

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From: OldAIMGuy	2/21/2006 5:17:49 PM
	of 387

I've used closed end funds for dividends for literally decades. They've worked well. While the price/share is pretty stable on a day to day basis, there can be some rather large movements from one end of the interest rate cycle to the other. On long term bond funds I've seen moves of 25% to 30% over the course of the interest rate cycle. If one has a long term view, one can capture both the ongoing dividend and pick up some capital gain as well. I only trade about 1/3 of the total value in a cycle as I depend upon the dividends for current income. However, buying additional shares when the price/share is low and the effective yield is high helps my overall average cost/share as well as my average yield. The last really good buying opportunity on the longer term high yield bond funds was back in 1999. By mid 2003 these same bond funds were sporting around a 30% share price improvement from their 1999 lows. I harvested about 30% of the position and have been waiting a rather long time now to put that cash and those gains back to work. However, the markets just haven't been cooperating! I've also purchased convertible corporate bonds once in a while. These can be purchased at times at a discount from their original offering price. Effective yield improves as the bond price falls. I've been fortunate to have never lost money on these as of yet. Again, we can pick up some decent yield and get a bit of capital gain if we buy these when they're out of favor. Again, with corporate bonds as well as govt. bonds I've not seen much in the way of bargains in quite a while. Current favorite corp. bond fund = CHY with a yield of about 9%. Best regards, Tom

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