2 Big-Yield Closed-End Funds
08/31/2012 11:15 am EST
When hunting big yields, sometimes it pays to diversify your risk by investing in a fund instead of a single stock, and this duo are prime examples, writes Richard Lehmann of Income Securities Investor.
Eaton Vance Enhanced Equity Income Fund II's (EOS) investment objective is to provide current income (dividend yield is about 9.9%), with a secondary objective of capital appreciation. It will pursue these objectives by investing primarily in large and mid-cap common stocks of companies with above-average growth potential and financial strength.
Under normal market conditions, the fund will also seek to generate current earnings by selling covered call options on a substantial portion of its portfolio securities. Currently, the fund's portfolio is made up of 82.8% large-cap and 17.2% mid-cap of common stocks. They also have call positions on 48% of their holdings.
The fund's top five holdings are: Apple (AAPL), 7.42%; Exxon Mobil (XOM), 4.44%; IBM (IBM), 4.11%; Philip Morris International (PM), 3.49%; and Coca-Cola (KO), 3.34%. With over 75 different issues in its portfolio, the fund is well diversified. The income from this fund is taxable.
A significant portion of last year’s distributions were return of capital. Hence, stock market performance is a major driver. This taxable fund would be a good addition to a medium-risk diversified account. Buy up to $11.60.
Gabelli Global Gold (GGN)
This investment's primary objective is high current income (dividend yield is about 12.2%), with a secondary objective of capital appreciation. The fund will attempt to achieve these objectives by investing at least 80% of its assets in equity securities of companies principally engaged in the gold industry and the natural-resources industries.
It invests at least 25% of its assets in the equity securities of companies engaged in the exploration, mining, processing, and distribution or trading of gold or the financing, managing, controlling, or operating of companies engaged in “gold-related” activities.
In addition to gold, the fund will invest at least 25% of its assets in the stock of companies engaged in the exploration, production, or distribution of natural resources, such as natural gas, oil, food and agriculture, forestry products, metals, and minerals. It will also utilize an option strategy.
This fund offers investors an income-producing gold allocation which would fit medium- to high-risk portfolios best, but low-risk investors should also consider small amounts to boost their yield. Buy up to $14.90.