This Fund Offers An 8% Yield And Capital Growth But Distribution Needs Work

Investment thesis: Distribution has question marks but the Eaton Vance Tax-Advantaged Dividend Income fund (EVT) can effectively be used by aggressive investors seeking tax-advantaged total return through growth and income
Fund Overview
(Source: EVT 2017 Annual Report)

(Source: CEF Connect)
Objective: Provide a high level of after-tax total return through dividends and capital growth
Strategy: Investing in a diversified portfolio of global dividend paying common and preferred shares
Assessing the monthly distribution A review of the fund’s monthly distribution yields mixed results. While the fund is profitable, has maintained a steadily growing distribution since the financial crisis, and has an impressive 8.44% current yield, there are indications that the distribution is in a tenuous position. For whatever reason, the underlying portfolio has been generating progressively less investment income to cover the distribution. It’s gotten to the point that half of the 2017 distribution had to be covered by portfolio capital. Granted the portfolio is achieving capital growth, management cannot rely on capital appreciation to carry the fund. This is especially concerning now that stocks may not have that much more room to grow. The fund has a positive $17.9 million UNII balance, which is about two months of distributions so they have a little wiggle room to come up with a strategy to address the declining NII and hopefully maintain portfolio... Read more

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