Mar 01 2017

My Latest Buy: ZTR

Another month, another dividend stock buy. For February, my stock buy was 80 shares of Virtus Global Dividend & Income Fund Inc (NYSE:ZTR) at $11.38 per share. With a monthly dividend of 11.3 cents per share, that gives this buy an annual yield of 11.92%. Not bad! As I always do when I buy into a stock for the first time, I will go over what I think are its upsides and downsides.

Dividend Yield. Balancing risk versus reward, I usually aim for dividend yields in the 8-12% range. ZTR is certainly within that range, with a yield of 11.92% (at the stock price of $11.38).
Monthly dividend. Other than my heavy AWP focus late last year, I haven’t bought many monthly dividend stocks in some time. Fortunately, ZTR’s dividends payout every month which will help smooth out the income spikes from quarterly dividend payouts and raise the minimum monthly amount of dividend income.
Age. ZTR is quite old for a closed-end fun, starting in 1988 and paying dividends to shareholders starting in 1989. This means ZTR has gone through three recessions (early 1990’s, dot-com crash of 2000, and the Great Recession of 2008), so its management team has proven that they know how get through difficult economic times.
Portfolio. Over 65% of ZTR’s investments are in specific companies. Another 26% is invested in government and corporate bonds, with the majority of them being BBB grade or higher. Two-thirds of ZTR’s portfolio are a conservative group of sectors, such as telecom, financials, consumer staples, utilities, and health care. The other one-third are more volatile sectors (consumer discretionary, energy, industrials, real estate, and IT).

Institutional Investment. With only 15% of ZTRs shares owned by institutional investors, that’s not a very strong vote of confidence in ZTR, despite the positives mentioned above.
Leverage. ZTR is a leveraged fund, with an effective leverage of 16.18%. Compared to many of my previous ETF/CEF stocks, that’s actually a rather moderate rate, but I would prefer to see leverage be lower. High leverage means higher returns, but it also means higher risk.

Overall, ZTR should be a good investment. However, it’s low institutional investor interest does concern me as does its moderate rate of leverage. As with last month’s WDR buy, only time will prove if this buy is a wise choice or not.

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