CHI - CHI: More Trouble Covering The Distribution Plus An Enormous Premium

2024-04-23 17:00:23 ET

Summary

• The Calamos Convertible Opportunities and Income Fund offers a high level of current income without sacrificing the potential upside available from common stocks.
• The CHI closed-end fund has a lower yield compared to its peers, but this may indicate a more sustainable yield.
• The fund has delivered a trailing five-month performance that most investors would find reasonably acceptable.
• The fund failed to cover its distribution fully for the most recent fiscal year. This was the second full-year period in a row in which this was the case.
• The fund is trading at an enormous premium on net asset value, so it appears to be quite overpriced.

The Calamos Convertible Opportunities and Income Fund ( CHI ) is a closed-end fund aka CEF that allows income-focused investors to receive a very high level of current income without sacrificing the upside potential that can accompany an investment in common equities. The fund does reasonably well at this task, as it boasts a 10.44% yield at the current price. Here is how that yield compares with some of the fund's peers:

As we can see, the Calamos Convertible Opportunities and Income Fund has a lower yield than the majority of its peers. This is something that could be disappointing to many investors, especially those who are seeking to achieve a very high level of income from the assets in their portfolios. However, there is a certain amount of risk that comes from funds that have much higher yields than that of their peers, as an outsized yield can be a sign that the market doubts the fund's ability to sustain its yield going forward. Regular readers might recall that the two Virtus funds shown above have a somewhat troubled history in this respect. The Calamos Convertible Opportunities and Income Fund has been somewhat better at providing its investors with a stable level of income over the years, which is something that we can all appreciate. After all, most income investors would almost certainly prefer to spend their time enjoying life than stressing out over their portfolios, never mind monitoring them constantly....

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