CLM - CLM: Equity CEF With A 18% Yield

2024-02-17 07:38:44 ET

Summary

• Cornerstone Strategic Value Fund is an equity closed-end management investment company that aims to provide high dividends from a portfolio of equity names.
• The fund's 18% dividend yield is not supported by its underlying assets, and the CEF has seen its NAV decline by approximately -6.8% annually in the past decade.
• The fund is subject to overall equity market moves and is at risk of a significant sell-off, potentially even moving to a discount to net asset value.
• CLM has a managed distribution policy, but is very straightforward about the impact to its NAV from a high distribution rate.
• For the January 2024 payment date, over 50% of the dividend represents return of capital.

Thesis

Cornerstone Strategic Value Fund, Inc. ( CLM ) is a closed-end management investment company, originally incorporated on May 1, 1987. The vehicle is an equity CEF, aiming to provide investors with high dividends from a portfolio of equity holdings. Long term, the fund's total return matches the one exhibited by the S&P 500, but CLM is a classic story of a CEF marketing itself via a high dividend yield, with the vehicle now paying 18%....

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