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2 days before PIMCO dropped their Calif Muni Fund lll's dividend by a Whopping 25%, their Semiannual report said everything was rosy. The report bragged exposure to revenue, healthcare & tobacco-settlement bonds OUTPERFORMED the muni markets, with good maturity durations all contributing to performance. TWENTY FIVE PERCENT. In one day! Isn't that deceptive marketing?
While at first glance it appears nasty please note the date(s) the semiannual report covers. Often there is at least a 3-month lag between when you actually see/receive the report and the time period which the report covers.
Mark: The date on the report (that included the stellar assessments of the fund) was dated just 2 days before the announcement of the dividend drop.
Maurice: The market price drop you refer to was AFTER Pimco lowered their dividend BY 25%. OF COURSE the market price would drop then. I'm not sure I would call that volatility; it's a market correction. But shouldn't internal fundamentals to the fund and it's profitability determine what the fund should pay out, and let market factors adjust what the market price should be?
Why drop a dividend by such a large percentage all in one swoop, when published profit are good? Why not do it gradually, if Pimco was anticipating rising interest rates, or what ever their concerns were? PIMCO had to realize investors in PZC would lose BOTH market value and 25% of that income almost instantly.
Zippy, are you aware of the monthly Pimco earnings reports on its CEFs? They're the best real-time info on NII and UNII, which can give out early hints of trouble covering dividends with the income the funds earn. I don't know if they would've helped in the case of PZC since I've never followed it, but those regular reports are worth keeping up with, generally speaking.
Thanks AndyJ ! Where in these reports would it describe income and distribution? I see yields, NAVs, Total returns but not Income/expense info.
Not sure which report you're looking at, but it's apparently not the one I'm referring to. It's called "UNII Report," and you get to it like so:
Go to the Pimco site and put any CEF ticker into the search box. When that page loads, scroll down to Documents (or far enough down you can pick Documents from the horizontal menu) and click on UNII Report (should be the top doc in the left column). That'll bring up an Excel sheet that has all the Pim CEFs in a table with cumulative NII, current UNII, current distribution amount, and the distro coverage ratio for three different time periods.
Sometimes you can spot falling trends in those figures that may be early warning signs of div cuts sooner or later. Caution, though; Pimco funds frequently have a surplus in NAV via security or derivative gains that the manager can steer into the distribution stream, so you need to evaluate NAV direction and magnitude before concluding they'll have a hard time paying the current distribution in any specific case.
Comments
Maurice: The market price drop you refer to was AFTER Pimco lowered their dividend BY 25%. OF COURSE the market price would drop then. I'm not sure I would call that volatility; it's a market correction. But shouldn't internal fundamentals to the fund and it's profitability determine what the fund should pay out, and let market factors adjust what the market price should be?
Why drop a dividend by such a large percentage all in one swoop, when published profit are good? Why not do it gradually, if Pimco was anticipating rising interest rates, or what ever their concerns were? PIMCO had to realize investors in PZC would lose BOTH market value and 25% of that income almost instantly.
Go to the Pimco site and put any CEF ticker into the search box. When that page loads, scroll down to Documents (or far enough down you can pick Documents from the horizontal menu) and click on UNII Report (should be the top doc in the left column). That'll bring up an Excel sheet that has all the Pim CEFs in a table with cumulative NII, current UNII, current distribution amount, and the distro coverage ratio for three different time periods.
Sometimes you can spot falling trends in those figures that may be early warning signs of div cuts sooner or later. Caution, though; Pimco funds frequently have a surplus in NAV via security or derivative gains that the manager can steer into the distribution stream, so you need to evaluate NAV direction and magnitude before concluding they'll have a hard time paying the current distribution in any specific case.
Good luck, Andy J.