CRF & CLM 22% dividend yielding funds

[97guns]

I'm eyeballing these 2 cornerstone funds for income, both paying a 22% monthly dividend, anyone holding or have researched them at all?

[frugal saver]

Was it you that posted about Closed End Funds before? I'd never really looked into them before that post.

I did look at Cornerstone. Besides the expenses being high (1.31%) my main problem is having to pay all those taxes from the monthly distribution.

CRF is currently paying .2289 per share per month--.14 is return on capital (not taxed) and the rest is a mix of income, short term capital gains and long term capital gains.

CLM has the same expenses, and their payout is split between .175 per share return on capital and .055 income, so only the income would be taxable.

At that rate at some point you're going to zero out your return on income and then all the distribution will be taxable.

I think both are intriguing, but the expenses/tax ramifications are too much for me.

[bjl584]

I would research to make sure the dividend is sustainable.
If you have access to a ROTH IRA, purchase these funds within it to avoid taxation.

[corn18]

I know past performance is no guarantee of future returns, but man, did these funds get hit HARD in 2008-2009. If you can handle the risk, then it might be worth the 22%. As for taxes, as bj noted, put them in a tax sheltered vehicle.

Tom

[Jluke]

Have you looked at the price chart for these two? The NAV is steadily going down, that is why the yield is so high.

So if you want to call it a bottom, now might be the time to get in. But I'd be more concerned about conserving my principal balance than chasing yields and paying a high expense.

Disclaimer: novice evaluation of these two funds.

[97guns]

Thanks for some of the insight to these 2 issues, I'm a total newbie at this, they are 2 holdings in my brothers portfolio and yes he is holding them in his IRA. It's the first time I've ever heard of Closed end funds and had to google about them. I'm considering selling off some non income producing assets for some income generation and the 22% had me licking my chops.

[rennigade]

like the saying goes..."if its too good to be true"....

[Singuy]

http://boards.fool.com/messageprint.aspx?mid=29636941

Apparently its legalized ponzi scheme in stock form. Interesting read.

[MakeAStash]

Of the ultra-high dividend payers one must be wary they not basically taking your money (and those of others), and essentially paying it back out as dividends. If the share price of that asset keeps dropping that's a warning sign your own money is merely being shuffled back to you in dividend form, on which you'll owe taxes.

[frugal saver]

Thanks for some of the insight to these 2 issues, I'm a total newbie at this, they are 2 holdings in my brothers portfolio and yes he is holding them in his IRA. It's the first time I've ever heard of Closed end funds and had to google about them. I'm considering selling off some non income producing assets for some income generation and the 22% had me licking my chops.

Morningstar has a section for Closed End Funds and includes some wonderful articles about the pros/cons.

http://www.morningstar.com/cefs.html

[TexasHusker]

I'm eyeballing these 2 cornerstone funds for income, both paying a 22% monthly dividend, anyone holding or have researched them at all?

They are paying 22% a month? You could recoup your entire investment after 4 months. Not sure I've ever heard of such !

[97guns]

No 22% yield for 12 months, it'll take 5 years