EVG - EVG: This 9% Yielding CEF Is Finally Attractive

2024-03-28 18:24:51 ET

Summary

• Eaton Vance Short Duration Diversified Income Fund is a fixed income CEF that is currently trading at a discount despite improved analytics and cash flows.
• The fund has a low duration achieved through holding floating rate leveraged loans and low-duration MBS bonds.
• EVG has overcome previous issues of overdistribution and now has a stable NAV, making it an attractive investment in the current high interest rate environment.
• The fund has a 9% distribution yield and trades with a -5% discount to net asset value.

Thesis

With the front end of the yield curve higher in the past year, short duration instruments have become appealing across asset classes. To that end, it is worth revisiting the Eaton Vance Short Duration Diversified Income Fund ( EVG ), a fixed income CEF covered more than two years ago. At the time of the initial article on the name, we highlighted for readers why the fund did not make sense at the time, having a very high, unsupported yield, with a high ROC ('return of capital') distribution....

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