CHI - AVK: The Destructive Distributions Are A Big Concern

2024-05-30 10:39:45 ET

Summary

• The Advent Convertible & Income Fund offers a high distribution yield of 11.93%, making it attractive to income-seeking investors.
• The AVK closed-end fund has outperformed most broad-market indices and its peers in terms of yield and performance over the past few months.
• The fund's allocation to convertible securities has declined recently, indicating a preference for junk bonds and a potential reduction in volatility.
• The fund has failed to cover its distributions over the past two fiscal years and its net asset value is down substantially. It might struggle to maintain its payout.
• The fund employs a substantial amount of leverage, which presents risks in the event of a market correction.

The Advent Convertible & Income Fund ( AVK ) is a closed-end fund, or CEF, that income-seeking investors can purchase as a method of achieving their goals. The AVK fund certainly manages to do fairly well at this task, as the fund’s shares currently boast an 11.93% distribution yield. Despite today’s current high interest rate environment, this is a much more attractive yield than that possessed by most broad market indices:

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