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Strategies & Market Trends : Young and Older Folk Portfolio
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From: jritz011/12/2025 7:14:58 PM
3 Recommendations

Recommended By
cajman1
Marmalade
QTI on SI

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Posted this on SI in regards to dripping a CEF that is trading at a premium. I know it won't be deleted here after putting in the effort to comment.

I don't want to offend anybody with this comment but I want to understand why anybody would drip DNP. I hope the following analogy makes sense:
My wife, sister-in-law and I drink coffee every morning. We will buy coffee when we see it on sale while grocery shopping.
What we won't do is buy it when it's not yet needed and particularly when the price is higher than average, and we definitely won't borrow money to pay for the higher price of the coffee when it's not needed.
That is basically what is happening when dripping DNP when the income is not needed. DNP is trading at a premium (paying more for the coffee when it is not needed yet).
DNP uses roughly 34% margin (using a credit card that won't be paid off monthly to buy the coffee is not needed at the time of purchase).

I can understand if someone needs the cash flow to live on and like the distribution stability, but I would prefer buying at fair value or on sale like many of the utility/ infrastructure funds (name brand coffee).
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