Looking for tax-advantaged dividend income? Like some of the other high yield income vehicles we’ve covered in our articles, Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) is a closed end fund, CEF, which yields over 7%.
EVT seeks to “provide a high level of after-tax total return consisting primarily of tax-advantaged dividend income and capital appreciation. Under normal market conditions, the Fund will invest at least 80% of its total assets in dividend-paying common and preferred stocks. The Fund may invest in common and preferred stocks of both domestic and foreign issuers. The Fund may invest up to 30% of its total assets in securities rated below investment grade. The Fund employs a value investment style and seeks to invest in dividend-paying common stocks that have the potential for meaningful dividend growth.” (EVT site)
Like certain other CEF’s, EVT’s management uses leverage, 22.30%, to ramp up its yield. Net assets were $1.56B, with 75 holdings, as of 9/30/20:
As of 9/30/20, US common stocks formed ~83% of EVT’s portfolio, followed by investment grade bonds, at 5.74%, and preferred stock, at 3.75%. These top 3 asset types form 92.68% of EVT’s asset mix, with high yield corporate bonds, foreign common stocks, and ETF’s forming the ~7% balance:
The fund is 94.11% invested in North American assets, with a small 4.75% position in Europe, and very limited exposure to Asia/Pacific and Latin America:
EVT’s top 10 holdings form 24.15% of its portfolio, with well-known large cap names from many different sectors.
At its 11/25/20 $22.67 closing price, EVT yields 7.68%.
EVT has paid a steady, “managed” monthly distribution of $.145 since July 2015, which generally goes ex-dividend around the 3rd week of the month, while paying in the last week of the month.
The distributions for the latest fiscal year, which ended in October, were comprised of 63% long term capital gains, and 37% in net investment income, with no Return of Capital.
EVT has outperformed its benchmark, the Russell 1000 Value Index, (shown below as the IWD ETF), over the past month and quarter, and is in line with it over the past half year, but still lags it over the past year and so far in 2020. The top contributions to EVT’s Q3 2020 portfolio relative returns came from the Tech and Real Estate sectors, while Industrials and Financials were its biggest laggards.
EVT has also outperformed the S&P 500 over the past month and quarter, but has trailed it over the past half year, past year and year to date.
Looking back further shows EVT with a big ~45% price gain in 2019, and generally outperforming the Morningstar US CEF US Allocation category over the past several years, except for 2016, when it lagged by about 73 basis points. Its NAV performance shows similar results vs. that category.
Buying CEF’s at a deeper discount or lower premium to NAV than previous historical averages can improve your chances of successfully investing in them.
Closed end funds, CEF’s, can offer investment bargain basement shoppers an opportunity to buy mutual funds at a discount. Since there are a finite quantity of shares, which, unlike conventional mutual funds, don’t change daily, investors can buy CEF’s at a premium or discount to NAV/share.
A CEF’s NAV/share is based upon the previous trading day’s closing value.
At its 11/25/20 closing price of $22.67, EVT was trading at -7.28% below its 11/24/20 NAV/share of $24.45. That discount is much deeper than its 1-, 3-, and 5-year discounts, which ran from just -2.54% to -4.90%:
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Disclosure: I am/we are long EVT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.