ETY: 10% Yielding CEF, But We Are Concerned About The Second Wave Of Coronavirus Infections
Published Apr 29, 2020 on Seeking Alpha

The key bullish catalyst is a potential, faster than expected end or a slowdown of the coronavirus health crisis.
The second wave of coronavirus infections remains the key near-term risk.
The fund has underperformed the S&P 500 index over the short and long run.
This time, we will present our readers with the Eaton Vance Tax-Managed Diversified Equity Income Fund (ETY), which was incorporated in November 2006. It is a closed-ended fund that is primarily focused on domestic and some international dividend-paying companies. In addition, this fund utilizes the writing of index call options to protect its portfolio in the case of a major market downturn. During normal market conditions, it also receives cash flows from underwritten options to enhance return for its shareholders. It pays a regular monthly distribution of $0.0843 per share and offers a 10.03% dividend yield as of April 24, 2020. This fund has recently experienced a market price decline of 42% in a month, as the result of the global financial market rout between the end of February - March 2020. In terms of the key bullish catalysts, we find the following (1), faster than expected U-shaped recovery of the US economy, primarily supported by the recent fiscal stimulus and expansionary monetary policy. (2) end or a rapid slowdown of the global outbreak of coronavirus crisis.
About the fund
“The Fund invests in a diversified portfolio of domestic and foreign common stocks with an emphasis on dividend paying stocks and writes (sells) S&P 500® Index call options with respect to a portion of the value of its common stock portfolio to generate current cash flow from the options premium received.”
(Source: Annual Report)
A particular combination of dividend-paying stocks and written S&P 500 Index call options can make up to only 80% of total assets. The fund can also invest at least 40% of its assets in common stocks from international issuers and cannot invest more than 5% of... Read more