Virtus: Global Approach to Monthly Dividends

07/26/2017 2:52 am EST


Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

In my pursuit to add more high-yield holdings that pay out highly desirable monthly distributions, my search for a quality addition to our model portfolio led me to the Virtus Global Dividend & Income Fund (ZTR), asserts income expert Bryan Perry, editor of Cash Machine.

This closed-end fund employs a managed distribution to pay out a minimum of 10% of Net Asset Value per year. Based on the year-to-date performance of its share price rising by 15.82%, the fund is outperforming the S&P 500 by almost 2 to 1.


At the end of the day, it’s all about asset selection and timing of buying and selling, when to use leverage and when to hedge, how to generate maximum income from the portfolio and use a management team with a hot hand.

For the two new advisors that began to manage the $330 million ZTR fund in 2016, the numbers they are sporting are most promising for future outperformance both in terms of income and capital appreciation.

ZTR is a diversified fund that has a current target allocation of investing its assets in 60% equity securities and 40% fixed income.

The fund’s investment objective is to seek total return, consisting of capital appreciation and income. The equity allocation invests exclusively in what the managers believe are “high-quality” companies within the high-yielding global equity universe.

Businesses that return free cash flow generated by the business to shareholders via dividends are the focus. Currently, financials occupy the largest weighting and make up 18.2% of the equity portion of the portfolio, right as the financial sector is breaking out.

The fixed income portion of the fund is designed to generate high total return from both current income and capital appreciation by investing primarily in intermediate-term debt securities across 14 fixed income sectors.

The fund employs active sector rotation, extensive credit research and disciplined risk management that strives to capitalize on opportunities across undervalued areas of the fixed income markets.

At present, the ZTR fund pays out a current dividend yield of 10.67%. To obtain that juicy yield, in addition to dividend and interest income from the underlying portfolio of stocks and fixed-income securities, the management team employs structural leverage of about 25%.

The fund also pursues an options overlay strategy that seeks to generate additional income through the use of index-based, out-of-the money put and call spreads.

This strategy is driven by implied volatility, as measured by the CBOE Volatility Index (or VIX as it’s also called), and seeks to exploit pricing inefficiencies in options on the S&P 500 Index.

I’m adding the Virtus Global Dividend & Income Fund to our Aggressive High-Yield Portfolio primarily because the fund is leveraged. But I view the components of the portfolio as a very smart blend of assets and see this as an all-season fund because of its wide diversification.

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