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What’s happening with IGD?

Today Global Equity Dividend & Premium Opportunity Fund (IGD) dropped price by almost 6%. Why is it happening? The fund announced a distribution yesterday and it meant another distribution decrease (a third decrease in a row).

ING Investments, LLC announced the monthly distributions on the common shares of two of its closed-end funds: ING Global Equity Dividend and Premium Opportunity Fund (NYSE: IGD) […]

The monthly distributions announced today are reduced from distributions paid in prior periods in an effort to align the Fund’s distributions with the current conditions in the equity and options markets. The Funds’ management considered a number of factors before deciding to decrease … Fund’s distribution, including the level of assets in each respective Fund, the dividend yield of the underlying equity portfolios and prevailing implied option volatilities.

With respect to … (the) Fund, the distribution will be paid on July 15, 2010, to shareholders of record on July 6, 2010. The ex-dividend date is July 1, 2010. The distribution per share for … (the) Fund is as follows:

Fund Distribution
Per Share
Change from
ING Global Equity Dividend
and Premium Opportunity
Fund (NYSE: IGD)
$0.100 – $0.025

I checked the stock (fund) closely to see why this is happening and whether I should sell this ETF or hold it. ING Global Equity Dividend and Premium Opportunity Fund (the Fund) is a non-diversified, closed-end management investment company. The primary objective of the Fund is to provide a high level of income, with a secondary objective of capital appreciation. The Fund seeks to provide investors with a high level of income from a portfolio of global common stocks with dividend yields and premiums from covered call option writing utilizing an integrated option strategy. The Fund would invest at least 80% of its managed assets in a portfolio of common stocks of dividend paying companies located throughout the world, including the United States. The investment adviser of the Fund is ING Investments, LLC. The Fund’s sub-advisor is ING Investment Management Advisors B.V.

I looked at the Fund’s numbers and during 2008 – 2009 the Fund has been losing money due to financial crisis. The Funds holds 20.56% in Financial sector and during the crisis this got hit severely:

Top Sectors

% of Total Investments as of 04/30/2010
Financials 20.56%
Energy 12.20%
Consumer Staples 12.10%
Utilities 10.94%
Health Care 10.48%
Telecommunication 9.03%
Industrials 7.08%
Information Technology 6.43%
Consumer Discretionary 6.39%
Materials 4.78%

Another issue is that the Fund holds almost 40% (37.44%) of its holdings in European regions and these were hit severely too due to debt crisis in Greece, Portugal and Spain.
In this light it seems to me as a wise move that the management reduced the Fund’s distribution to keep the fund aligned with its current cash flow. The total yield is still more than 10% and when considering that the financial sector as well as Europe will not be in the crisis forever, the IGD is a great opportunity to buy at a discount right now as a long term investment.

Based on that I decided to hold on this ETF and as my cash allows I will potentially buy more shares.

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