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Monday March 15, 2010
Global income from AllianceBernstein (AWF)
by Amy Calistri, editor The Daily Paycheck
And when it comes to income, AWF is as steady as they get, having spewed out monthly paychecks for nearly 17 years. Since its 1993 inception, this closed-end fund has delivered an average annual return of +12.0%. With 688 total holdings, it might be hard to find a portfolio as diversified as AWF's. Roughly 50% of the holdings are from the United States. However, the holdings hail from 51 different countries over all. 
When it comes to its corporate holdings, AWF seeks to avoid loading up on one sector in particular. In the most recent filing, the fund managers noted that bonds in industrial companies make up about 30% of the portfolio, with lesser exposure to consumer, telecom, energy, and finance stocks. These bonds aren't blue chips, but many are still household names. For instance, it holds debt from the department store Macy's Debt issued by Time Warner Telecom is another holding. The building material company Owens Corning and L-3 Communications, a company specializing in military technology, also have debt in AWF's portfolio. But while they may be familiar names, they don't always come with the best credit ratings. AWF tends to favor emerging market sovereign debt, and has bonds issued by governments such as Argentina, Brazil, and Indonesia. Yes, higher risk -- but yes, higher income. AWF raised its monthly dividend in December 2009 to $0.10 per share from $0.0925 per share. It's new annual dividend of $1.20 per share represents a yield of 8.8% at current prices ($1.20/$13.59). The fund is leveraged, but only by 11.0% -- which is not as high as many of its peers. This serves to increase the fund's income, as it can borrow at lower rates and invest in more loans at higher rates. But it can also be a source of risk in a protracted downturn. AWF is trading at a slight discount to its net asset value (NAV), which also gives investors a slight advantage on yield. Action to Take --> When it comes to credit quality, AWF is on the riskier side. But after 17 years, these fund managers have clearly demonstrated they know how to manage risk. And diversification has obviously served this fund well. The fund can be volatile, although the income stream is as dependable as the sunrise. Learn more about this financial newsletter at Amy Calistri's The Daily Paycheck. |
News Flash
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For a stellar yield of 8.8%, superb track record and a healthy exposure to sovereign debt, it's hard to beat the AllianceBernstein Global High Income Fund (NYSE: