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....
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BDJ: Enhanced Income Comes At A Cost