BDJ - BDJ: Enhanced Income Comes At A Cost
2024-03-10 09:00:00 ET
Summary
- BlackRock Enhanced Equity Dividend Fund uses option writing to enhance distributions and seeks dividend growth. BDJ currently sells at a 10% discount.
- BDJ has shown poor total returns compared to other equity funds and growth-oriented equity funds. Three other funds are used to illustrate that point.
- While BDJ provided enhanced income compared to many equity funds, its poor total return compared to those same funds and growth-oriented equity funds earn it a Sell rating.
Introduction
FOMC actions since early 2022 has, after over a decade, finally made some fixed income yields more than competitive with many common stock dividend yields. Equity fund managers can employ several strategies to stay ahead of the 5-7% yields non-equity asset funds now offer, the two most used are leverage and option writing. The BlackRock Enhanced Equity Dividend Fund ( BDJ ) uses option writing but almost no leverage. Here, I examine this Closed-End-Fund to see if they are living up to their name. Part of that analysis will compare BDJ against similar funds that are also widely followed by Seeking Alpha readers....
BDJ: Enhanced Income Comes At A Cost