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Follower ○○○

Pimix div cut??

There seems to be some back-ground chatter that Pimix has cut the monthly div from $0.0555 to $0.40. Anybody know for sure?

TIA

Eng

 

 

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Frequent Contributor

Re: Pimix div cut??

It was noted on Tuesday on Bond Fund Analysis thread but got buried in the chatter.

YBB
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Participant ○○

Re: Pimix div cut??

Yes; I know.

Just check out their website.

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Follower ○○○

Re: Pimix div cut??

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Frequent Contributor

Re: Pimix div cut??

I reported it already at the 2020 bond OEFs thread.

See (link)

Effective August 3rd, 2020, the PIMCO Income Fund (the “Fund”) is making a change to its daily
distribution rate. Over the course of the month this change will lead to a monthly distribution rate change
from $0.0555/share to $0.0400/share (Institutional Class).1

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Frequent Contributor

Re: Pimix div cut??

The price remains on the uptrend though.

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Participant ○○

Re: Pimix div cut??

What will the calculated new yield be if based on recent closing price?  
I calculated current yield of 5.64%, new yield is 4.1%.
In the past if there was a reduction in dividend, has the share price declined to keep the yield at the same rate?

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Participant ○○

Re: Pimix div cut??

You just took a thirty percent haircut on your monthly dividend.  Hope you werent depending upon it for your needs.  Pimco raised its fees on this fund a few months ago,  interestingly the fund charges 25 percnt of the distribution in monthly fees.  Even notoriously expensive hedge funds dont charge that much.  Pimco should be reducing its fees instead of reducing distributions to shareholders.

Im happy i bailed on this one a couple years back when it was over the12 bucks a share. Too many Argentina junk bonds.  There are much cheaper, and much safer ETFs to invest.    Never trust a mutual fund.  The fund comes first, you are the low man on the totem pole.

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Participant ○○○

Re: Pimix div cut??

What's the point in continuing to pay a higher "fixed" dividend if all it does is continuously erode the NAV? One's just a trade-off for the other. Fund managers are targeting a dividend that can better sustain the NAV in a lower-for-longer interest rate environment. I personally have doubts they can even hold the NAV stable with this newly declared dividend which is approximately a 4.1% payout based on the current NAV. But the chances are certainly improved. Let's face it, if there was dead certain that the current 4.1% dividend could be paid without more NAV erosion, the already huge AUM would swell even more.

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Re: Pimix div cut??


@Sheryldell wrote:

What will the calculated new yield be if based on recent closing price?  
I calculated current yield of 5.64%, new yield is 4.1%.
In the past if there was a reduction in dividend, has the share price declined to keep the yield at the same rate?


Large adverse impact is seen more in CEFs that trade at premium/discount from NAV, not in OEFs that trade at EOD NAV. Distribution fluctuations are routine for OEFs and Pimco Income has been an outlier on that.

YBB
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Re: PIMIX div cut

I think that a post can be deleted until 24 hrs and before someone responds to it. At this point, may be @RyanM can merge this thread into the other similar thread. 

YBB
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Contributor ○○○

Re: Pimix div cut??

In stocks or equity funds the NAV is set by supply and demand for the underlying stock. Bond fund NAV is set by the fund according to standard accounting rules. I don't see the fund NAV changing unless there is a liquidity crisis as there was in March. I believe that the AUM are pretty stable because there are many people that use PIMIX for income. It will be interesting to see what happens to the AUM due to the yield cut. Looking back on the long history of PIMIX the NAV did not erode due to high yield that I can see. There were about 4 previous times that PIMIX could have been bought at today's NAV.


@VA-Tech wrote:

What's the point in continuing to pay a higher "fixed" dividend if all it does is continuously erode the NAV? One's just a trade-off for the other. Fund managers are targeting a dividend that can better sustain the NAV in a lower-for-longer interest rate environment. I personally have doubts they can even hold the NAV stable with this newly declared dividend which is approximately a 4.1% payout based on the current NAV. But the chances are certainly improved. Let's face it, if there was dead certain that the current 4.1% dividend could be paid without more NAV erosion, the already huge AUM would swell even more.


 

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Participant ○○○

Re: Pimix div cut??


@Gary1952 wrote:

... Bond fund NAV is set by the fund according to standard accounting rules.



Of course .... but unlike some bond funds which pay a dividend essentially equal to the aggregate dividend of the underlying assets within the mutual fund pool, PIMIX declares a dividend ($/share). If the dividends of the underlying assets are less than than the declared dividend payout, per those accounting rules, it will put a net drag (negative) on that NAV; this is in addition to the inherent up/down pricing action of those same underlying assets. Bottom line, if PIMIX declares and pays a dividend in excess of the dividend stream of those underlying assets, the NAV will be forced down. The previous declared dividend of $0.555/share was unsustainable without NAV erosion.

@Gary1952 wrote:

... I don't see the fund NAV changing unless there is a liquidity crisis as there was in March.

I have no idea what you are trying to say here ... the NAV fluctuates routinely.

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Re: Pimix div cut??

What maters most is risk-adjusted return first and then worry about their distributions.  

Example PTIAX vs PIMIX for 3 years. The numbers show (link) that PTIAX was a better fund for performance, SD, Worse year, Max Draw and why Sharpe and Sortino are better.

Do I care if PTIAX paid about 4% while PIMIX paid 5-6%? not me and most shouldn't care either.  4% is still good reasonable distributions. In many cases, a search for higher distributions (bonds + stocks) may increase the risk/volatility too much.  PIMIX used to be one of the best bond fund ever but the magic is gone now.

Do I care what the NAV did? nope, I never look at NAV.  I care about total returns + risk attributes (SD and all the other columns.

PortfolioCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino Ratio
PIMIX3.70% 5.48%8.05%-0.27%-8.39% 0.40.47
PTIAX4.91% 4.59%7.36%2.01%-6.03% 0.720.92

 

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Participant ○○○

Re: Pimix div cut??

Yes, of course TR is what matters. My point is not to be overly concerned about the PIMIX dividend reduction if it prevents the NAV from hemorrhaging . The underlying assets haven't presumably changed and there is no reason that the PIMIX TR will be impacted by the dividend reduction. FWIW, this thread isn't about TR versus dividends nor is it about PTIAX versus the world of bonds, or at least it wasn't, lol.

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Re: Pimix div cut??


 Of course  you care about NAV in a bond fund. If there is no price appreciation then the TR=Yield. Take a fund like ANBEX with a paltry 1% yield. No one would be talking about it ifn the NAV had not appreciated substantially. And what is going on with muni funds? The NAV is dropping not the yield.

 

 My clarification below in red. You can't say the fund yield is the aggregate of the underlying assets. The management fee must come from that interest paid and possibly CG from trades. 

@VA-Tech wrote:

@Gary1952 wrote:

... Bond fund NAV is set by the fund according to standard accounting rules.



Of course .... but unlike some bond funds which pay a dividend essentially equal to the aggregate dividend of the underlying assets within the mutual fund pool, PIMIX declares a dividend ($/share). If the dividends of the underlying assets are less than than the declared dividend payout, per those accounting rules, it will put a net drag (negative) on that NAV; this is in addition to the inherent up/down pricing action of those same underlying assets. Bottom line, if PIMIX declares and pays a dividend in excess of the dividend stream of those underlying assets, the NAV will be forced down. The previous declared dividend of $0.555/share was unsustainable without NAV erosion.

@Gary1952 wrote:

... I don't see the fund NAV changing eroding unless there is a liquidity crisis as there was in March.

I have no idea what you are trying to say here ... the NAV fluctuates routinely.


 

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Participant ○○○

Re: Pimix div cut??

@Gary1952 

You are not processing what I have written and I don't know how to write it clearer. In and of itself, the reduction in PIMIX dividend payout need not create a reduction in TR. They were overpaying the dividend relative to the actual dividend of the underlying assets so the NAV was eroding (per accounting rules as you referred). This reduction should stabilize the NAV.

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Re: Pimix div cut??


@SlipSliding wrote:

VA-Tech -  correct me if I’m wrong, but if the dividend is reduced, and the NAV remains stable, isn’t the TR reduced, since TR = NAV change + Div?


Reduced TR relative to what? The NAV was eroding at the $0.555.share payout. In essence, an eroding NAV is a drag on TR.

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Contributor ○○

Re: Pimix div cut??

The Total Return should likely stay about the same either way. You’ve got two valuation streams, where increasing one decreases the other –

  • Distributions paid out
  • Retained Value of Assets

PIMIX is unique in OEF Bond Funds in that it tries to set a definite monthly distribution amount, rather than allow that to fluctuate based upon earnings. But it all normally comes out the same in the end.

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Re: Pimix div cut??

  • @VA-Tech  said "What's the point in continuing to pay a higher "fixed" dividend if all it does is continuously erode the NAV?"

I was disagreeing with that. There is no proof the NAV was eroded to pay the 5+%. The NAV has been increasing lately. It decreased due to liquidity of the assets in March. Lowering the yield will not affect any of that. The NAV changes with interest rate fluctuations as well. Show me where the NAV needs to stabilize due to the old 5+% yield per the link below.

BTW PN was wrong  PIMIX has daily accrual of distributions. The NAV is not affected by the distributions like some other bond OEFs where the distributions flow thru the NAV.

 

http://quotes.morningstar.com/chart/fund/chart?t=PIMIX&region=usa&culture=en_US&dataParams=%7B%22zoo...


@VA-Tech wrote:

@Gary1952 

You are not processing what I have written and I don't know how to write it clearer. In and of itself, the reduction in PIMIX dividend payout need not create a reduction in TR. They were overpaying the dividend relative to the actual dividend of the underlying assets so the NAV was eroding (per accounting rules as you referred). This reduction should stabilize the NAV.

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