Friday, November 4, 2011

DRW_Too good to be true?

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This info was added Dec. 28, 2011. As of today it appears that DRW will miss paying its fourth quarter dividend. Ouch! The overall dividend yield for the year was more than 10 percent but still I was expecting about $400 come the end of December.


What happened? I found this explanation on the Net:


"DRW holds PFICs (Passive Foreign Investment Companies) in its portfolio. PFICs must mark to market each year (in Q4) and realize a gain or loss in those PFIC shares. PFIC loses are offset against PFIC gains, and then against portfolio income. The PFIC losses for DRW this year wiped out the gains and Q4 dividend income, therefore, no dividend distribution . . . "


I'm holding my position. I'm not overexposed and feel little concern. We'll wait to see what the yield is delivered at the end of the first quarter of 2012 and we'll hope the value of this ETF doesn't continue to lose ground. This missed dividend payment does add a whole new wrinkle to owning DRW.
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 As you know, I'm retired. I need income. Man, do I need income. With my back to the wall, I take a few chances — or what I see as chances.

I own some DRW. I bought some high and some low. I may buy some more if it drops in price in the present bear market environment. I would not put too much into DRW but it delivers a high enough yield to make chance taking seem reasonable. And how much is that? Answer: 13.10%.

Such a high yield has the weird effect of both attracting me and repelling me. I'm a firm believer that you don't get something for nothing. Such a high yield must come with a downside. So I buy some, but I don't buy a lot.

Yet, Morningstar awards DRW five stars, and rates DRW as a below average risk with an above average return. So, do you feel lucky? Eh?




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