XFLT - CLM & CRF: High Yields High Premiums Bargain Prices (For Some)
2024-07-01 17:15:08 ET
Summary
- CLM and CRF have historically sold at very high premiums, perhaps driven by the allure of high cash yields.
- Shareholders participating in their dividend-reinvestment plans (DRIP) have been able to buy new shares at a highly discounted price (i.e. NAV), essentially at the expense of non-DRIP shareholders.
- As more shareholders come to understand how this works, I expect the air will slowly go out of the balloon.
- I own these funds personally (Who can look a gift horse in the mouth?).
- But I'm not sure how sustainable a business model is that seems to benefit one set of shareholders so clearly at the expense of others.
High Yields, High Premiums, Bargain Prices (For Some)
I've struggled for years trying to understand the two Cornerstone funds, Cornerstone Total Return ( CRF ) and Cornerstone Strategic Value ( CLM ). The funds are unusual in that they seem to deliberately pay out much higher distributions than they actually earn, which has resulted in their Net Asset Values depreciating regularly over their long lives, since being founded 37 years ago (CLM in 1987) and 51 years ago (CRF in 1973)....
CLM & CRF: High Yields, High Premiums, Bargain Prices (For Some)