Closed-End Funds have offered shrewd dividend seekers, great opportunities for years. Often times the reason underlying the premium or (more often) the discount is simply liquidity-driven. Sometimes it’s more complicated than that…but, in my mind, it’s always worth a deeper look.
SmartMoney has a great article offering some insights into the nature of Closed-End Funds and their discounts:
“It’s not uncommon for one that holds, say, $13 a share worth of stocks or bonds to sell for $12. Discounts like that give investors an opportunity to secure dividend yields that are larger than the yields on the underlying stocks and bonds. And if they choose wisely, they can make money two ways, says Doug Bonds, manager of the Cohen & Steers Closed-End Opportunity fund: (1) when the fund assets earn a return, and (2) if the fund discount shrinks.”