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Balanced Income With
a 17.3% Yield
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Published:
December 8, 2008
For those looking to bottom-fish for
high-yield stocks and bonds, but with the diversification and safety
of a managed portfolio, Evergreen International Balanced
Income Fund (NYSE: EBI,
$10.10) is a good option. The closed-end
fund's management team at Evergreen Investments is solid and
experienced; the equity portfolio of the fund is run by Francis
Claro, who has been working in the investment management field since
1986. The fixed-income portion is managed by Anthony Norris and
Peter Wilson, who, along with their team, have over 30 years of
combined experience in fixed-income securities.
The fund's balanced approach -- a 60/40 mix of stocks/bonds --
limits volatility and boosts income, as bonds are higher-yielding
and carry less downside risk or upside potential compared with
stocks. To boost yields further, the fund's managers write calls on
international indices against about half of the equity portfolio.
While this limits upside in rising markets, it bring in copious
amounts of cash for dividend payments.
The fund's top sectors include utilities (13% of portfolio) and
telecom stocks (11%) -- steady eddies that tend to hold their own
during recessions. One of the fund's top holdings is France Telecom,
one of my favorite foreign dividend plays. Other holdings include
bonds issued by Norway, Mexico and Canada, coupled with stocks like
Unilever and Nintendo. No single holding makes up more than 3.5% of
the portfolio.
EBI is diversified geographically, which limits the risk of a market
meltdown in any one country. The top country weightings are the U.K.
(17%), France (11%), Germany (8%), Norway (7%) and Canada (5.5%).
The fund currently trades at a huge discount to net asset value
(NAV) of -22.1%. That
means you're buying $1.00 worth
of portfolio holdings for only
$0.78. Even if the
underlying portfolio remains flat, you could profit nicely from the
discount narrowing -- not to mention the hefty 17.3%
dividend yield.
The fund has paid a monthly dividend of $0.1458 per share since
December 2007. Given the current environment, it's likely some of
the fund's holdings could cut their dividends in the coming months.
That said, it's hard to envision a scenario where the fund doesn't
generate a double-digit yield over the next year, thanks to its
focus on relatively stable sectors.
If you're looking for a high-yield, one-stop fund that gives you a
diversified mix of foreign stocks and bonds, the Evergreen
International Balanced Income Fund fits the bill right now. This
isn't for the meek at heart, as some of its holdings almost
certainly will cut their payouts in the coming year. But even if
they do, that doesn't necessarily mean EBI will, and the fund's
total dividend yield probably will remain in the double digits.
Nick Lanyi
Editor
High-Yield International
About High-Yield International
High-Yield International is
a monthly investment newsletter focused on bringing subscribers the
highest-yield securities in the world. By focusing solely on those securities
trading outside of the United States, this newsletter offers a host of relatively
unknown investment options that you probably won't find coverage of anywhere
else.
Many of these securities provide investors with annual dividend yields of 10%,
15%, even 20% or more, while also outperforming the major U.S. averages.
About Nick Lanyi[includes/bios/lanyi.htm]
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