The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Bonds & Fixed Income Investments


Subject:  Re: Closed End Bond Funds Date:  4/30/2000  10:26 PM
Author:  Crosenfield Number:  607 of 35576

Right, if there is a discount to net asset value, you get an interest above what you would get otherwise. Sometimes it can be substantial.
In Barrons you might note some term trusts. Look on the pages dealing with closed end funds. I note Blackrock 2009 (BCT) selling at about 16% below net asset value. On or about the end of November 2009, this entity will have sold all assets and will make a final distribution of interest and principal to all shareholders and cease to exist. The goal is to distribute $15 per share, and in the meantime to pay a monthly dividend as high as practical consistent with the ending net asset value of $15.
As 2009 approaches, you can be sure that that 16% below net asset value will gradually go away. Look at other similar ones, dates listed in Barrons. The ones that end in the next couple years have a low discount. Lower than they did 5 years ago, all of them.
So in addition to the monthly dividends, you can figure a gradual appreciation of the stock price to meet net asset value.
Where's the catch? These things, like all bond funds, pay dividends. That differs from bond interest in that the fund is not REQUIRED to continue to pay the same dividend, and historically, as their remaini