Wednesday, March 2, 2016

Recent Transfer: AllianzGI Equity & Convertible Income Fund

AllianzGI Equity & Convertible Income Fund (NYSE:NIE), formerly AGIC Equity & Convertible Income Fund, is a diversified, closed-end management investment company. The fund's investment objective is to seek total return consisting of capital appreciation, current income and gains.

Since November 2015, I have been transferring stocks from my portfolio at Scottrade to DivGro. Altogether, I've transferred 16 stocks and one closed-end fund (CEF), adding $2,236.22 to DivGro's projected annual dividend income and $2,004.70 in past dividends to DivGro's dividend tally.

NIE is the second CEF I'm transferring to DivGro.

To recap, here are all the stocks and CEFs I've transferred to DivGro:

Coca Cola (NYSE:KO)
Union Pacific (NYSE:UNP)
Proctor & Gamble (NYSE:PG)
Gilead Sciences (NASDAQ:GILD)
Kimberly-Clark (NYSE:KMB)
Reynolds American (NYSE:RAI)
Dr Pepper Snapple (NYSE:DPS)
Dominion Resources (NYSE:D)
Ford Motor Company (NYSE:F)
W.P. Carey (NYSE:WPC)
The Walt Disney Company (NYSE:DIS)
    7.Toronto-Dominion Bank (NYSE:TD)   16.Main Street Capital Corporation (NYSE:MAIN)
    8.Pfizer (NYSE:PFE)   17.Nuveen Premium Income Municipal Fund 2, Inc (NYSE:NPM)
    9.Texas Instruments (NASDAQ:TXN)   

About CEFs

A CEF is a publicly traded investment company that raises capital through an initial public offering (IPO). The fund issues a fixed number of shares in the IPO, after which shares in the fund are traded on a stock exchange just like stocks.

The share price of a CEF is determined entirely by market demand, so shares can trade below, at, or above net asset value (NAV). You can look up the NAV of a CEF and so determine if the fund is trading at a discount or premium to NAV. CEF Connect is a comprehensive (and free) resource.

The assets in a CEF are professionally managed according to the fund’s investment objective and policies. The fund may invest in stocks and bonds, and it could use leverage to enhance yield.

Most CEFs distribute income on a monthly or quarterly basis, and shareholders have the option of reinvesting their dividends or receiving cash.

About NIE

As mentioned earlier, NIE's investment objective is to seek total return with capital appreciation and high current income through investment in convertible equity, income producing securities and through utilizing an options strategy.

Under normal circumstances, the fund will invest at least 80% of net assets in a combination of equity and income-producing convertible securities. The fund also employs a strategy of writing call options on equities to enhance distributions payable to the fund's shareholders.

In selecting investments for the fund, the managers ordinarily look for strong fundamental characteristics including, among others: above-average earnings growth; high return on invested capital; a healthy or improving balance sheet; strong competitive advantages, and development of new technologies.

Currently, NIE is trading at a discount of 12.77% to NAV, which is just below the 52-week average discount of 13.48%. 


    2012-10-17 Bought: 110 shares of NIE at $17.74 per share:$1,951.16
    2013-01-28 Dividend on 110 shares at 28¢ per share:$30.80
    2013-03-28 Dividend on 110 shares at 28¢ per share:$30.80
    2013-06-27 Dividend on 110 shares at 28¢ per share:$30.80
    2013-09-26 Dividend on 110 shares at 28¢ per share:$30.80
    2014-01-06 Dividend on 110 shares at 52¢ per share:$57.20
    2014-03-28 Dividend on 110 shares at 28¢ per share:$30.80
    2014-06-27 Dividend on 110 shares at 28¢ per share:$30.80
    2014-09-26 Dividend on 110 shares at 38¢ per share:$41.80
    2015-01-06 Dividend on 110 shares at 38¢ per share:$41.80
    2015-03-27 Dividend on 110 shares at 38¢ per share:$41.80
    2015-06-26 Dividend on 110 shares at 38¢ per share:$41.80
    2015-07-07 Bought: 20 shares of NIE at $19.60 per share:$391.97
    2015-09-25 Dividend on 130 shares at 38¢ per share:$49.40
    2015-10-01 Bought: 61 shares of NIE at $17.10 per share:$1,042.98
    2015-12-31 Bought: 46 shares of NIE at $17.96 per share:$826.08
    2016-01-05 Dividend on 191 shares at 38¢ per share:$72.58
 Total Capital Invested $4,212.19

Total Dividends Received:$ 531.18

With this transfer, DivGro's projected annual dividend income increases by $360.24.

Why NIE?

Here are some reasons I like NIE and why I decided to transfer the shares to DivGro:
  1. NIE is trading at a discount of nearly 13% to NAV despite having high-quality holdings and no leverage.
  2. The fund yields nearly 9%, which is comparable to higher risk alternatives in the market, such as business development corporations and mortgage REITs. 
  3. NIE has a high quality portfolio full of great companies, including Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), Visa (NYSE:V), Facebook (NASDAQ:FB), Costco (NASDAQ:COST) and Starbucks (NASDAQ:SBUX).
  4. Investing in CEFs like NIE provides additional diversification. In the case of NIE, the fund has well over 100 holdings.
  5. The fund has a baseline expense ratio of 1.07%, which is reasonable. Anything above 1.5% is too high.
Thanks for reading! Do you have any thoughts on NPM? Do you own any closed-end funds? Please share your thoughts below.

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