Still confused. CapitalNinja, I've owned BKN since '09, and I AM getting paid around 5.8% a year. I just went back and divided my annual dividends into the value of BKN for that year, averaged it all to get the 5.8%. Yes, the NAV has fluctuated up and down, but I don't care, I'm in it for the annual income. The dividend history chart here:
http://www.dividendchannel.com/symbol/bkn/
seems to show a consistent payout, with one dip in 2008. And even the price hasn't fluctuated as much as the stock market itself. As a Moustachian, I'm looking for income that beats the 4% take-out rule, and this seems to work. I'm not here to defend BKN, I'm a long way from an expert, I'm just trying to figure out what is going on. I have a portfolio full of cefs/etfs that have been paying me income over 4% for years, but I've never gotten a solid answer to my question. Notice that even here I get differing opinions? I have to assume, based on BKN and my other cefs and etfs, which are paying as advertised, that fees do not come out of dividend yield. But it would be nice to have an expert confirm it!
Thanks all.
I don't know any particulars for BKN, but all managed investments have an expense ratio, and some how or other they get paid. It seems like there are only three possibilities: they reduce your capital base, they reduce your dividends, or some combination of the two. I suppose they could also ask you to pay a fee each year, but from your post, I'm guessing they're not.
If you put $1000 into BKN, ten years later, can you take that $1000 out again (possibly minus some entry/exit fees). If you can, it means they're not reducing your capital base. So all that leads to, is it must be coming out of your dividend.
So you say you're getting 5.8% a year, so if say their expense ratio is 1%, I'd assume its really, in gross terms, earning 6.8%.