There really isn’t much to say about my latest buy of Calamos Global Dynamic Income Fund (NASDAQ: CHW), a closed-end fund that’s widely invested in individual companies, convertables, and corporate bonds. Last month I bought 150 shares of CHW, and early this month I bought an additional 150 shares at $7.40 per share, bringing my total shares of CHW to 300. With a monthly dividend of 7 cents per share, my monthly income from CHW has doubled to $21.00 per month, and my average yield is 11.09% (more about that later).
Will I buy more shares? I don’t think so, and here’s why: I didn’t do enough due diligence and, after buying more CHW, I discovered that a significant portion of CHW’s monthly payout is Return of Capital (ROC). I prefer stocks whose dividend payouts are 100% income or very nearly so. When the time comes to sell a stock and determine taxation of any gains, ROC complicates things by changing the cost-basis of the initial stock buy. With ROC, the yield is rather misleading because you’re just getting some of your money back and not making new money. I also made the same mistake when I bought 70 shares of AWP, but fortunately I didn’t go in very deep on it.
Other than the ROC issue, I still like CHW for the reasons given in the previous My Latest Buy post, so I will stick with CHW for the time being (unless its price rises enough for me to sell it off and at least break even on it).