Another month, another stock buy! For June, I made only one stock buy: Wells Fargo Advantage Income Opportunities Fund (NYSEMKT:EAD). I bought 160 shares at $8.01 per share. With a dividend of 6.8 cents per share, those 160 shares will payout $10.88 every month for an annual yield of 10.19%.
As per my usual format of writing about stock buys, let’s take a look at my pros and cons of buying into EAD.
Pro:
Yield. Looking at the dividend payout history of EAD, the dividend was slowly and steadily reduced from early 2009 to 2013. But since 2013 the dividend decline stopped and has remained stable at 6.8 cents per share. Hopefully it will continue to remain stable and *maybe* go up. My dividend investing portfolio’s average yield is approximately 10%, so EAD’s 10.19% dividend yield does nothing to raise or lower that average yield, and I’m fine with that.
Monthly distribution. For the past several months, the majority of my stock buys have been of stocks with quarterly dividend distributions. Maybe I’m impatient, but I like to have dividends coming in as soon as possible instead of having to wait an extra 2 months between payouts. EAD pays out on the 1st of every month, which is very welcome.
Negative.
Age. Unlike some ETFs that I have bought that have been around since the early 90’s, EAD is a relatively new fund. Established in early 2003, the only economic downturn that EAD has experienced is 2008’s financial crisis and the resulting Great Recession. In my opinion, a fund’s ability to navigate the rough waters of a recession is an indicator of management’s competence.
Institutional ownership. With institutional investors owning just 19% of EAD’s shares, it seems that interest among investors is lukewarm at best.
Leverage. EAD’s effective leverage of 26.6% is rather high, but that’s typical of ETFs with a relatively high yield.
Overall, EAD seems to be a “so-so” ETF fund, given that the above pros and cons nearly cancel each other out. Will I buy more EAD in the future? Maybe. Assuming the dividend hasn’t been cut and the price drops enough to raise the yield to 11% or better, then maybe I will grab more EAD shares.
This buy will lift my projected average monthly dividend income by $10.88 to $719.33. Nice!
