Virtus Diversified Income & Convertible Fund Discloses Sources of Distribution – Section 19(a) Notice
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Insights
The announcement by Virtus Diversified Income & Convertible Fund (ACV) regarding its monthly distribution is a pivotal piece of information for shareholders and potential investors. The distribution of $0.18 per share is a direct indicator of the fund's current earnings and operational efficiency. In this context, the consistency of the distribution level under the Managed Distribution Plan signals the fund's commitment to providing regular income to its investors, which can be particularly attractive to income-focused shareholders.
However, it's crucial to scrutinize the underlying components of the distribution. The fact that it may be paid from net investment income and realized capital gains, or a combination thereof, suggests that the fund is actively managing its portfolio to generate cash flow. This strategy can be effective in stable market conditions but may face challenges during market volatility. Additionally, the implication that distributions could result in a return of capital if earnings and gains fall short is noteworthy. This could dilute the investment's value over time and may not be sustainable in the long term, potentially impacting the fund's net asset value (NAV).
From a market perspective, the distribution announcement by ACV can influence investor sentiment and market perception of the fund. A consistent and predictable distribution can make the fund an attractive option for investors seeking regular income streams, potentially increasing demand for the fund's shares. However, the market will also react to the sustainability of these distributions. If the distributions are frequently supplemented by returns of capital rather than earnings, this could raise concerns about the fund's long-term growth potential and earnings capability.
It's also important to consider the broader economic environment when evaluating the impact of such distributions. In a low-interest-rate environment, income funds like ACV might be in higher demand as investors look for alternative income sources. Conversely, in a rising interest rate environment, the attractiveness of fixed income distributions might diminish as investors can find competitive yields in less risky assets like bonds.
The tax implications of the distributions from ACV are a significant consideration for investors. Distributions that are classified as net investment income or realized capital gains are subject to different tax treatments. For example, qualified dividend income and long-term capital gains may benefit from lower tax rates compared to ordinary income. On the other hand, distributions that are considered a return of capital are not immediately taxed but reduce the investor's cost basis in the fund. This can lead to a higher capital gain—or a lower capital loss—when the shares are eventually sold.
Investors should be aware of the fund's distribution policy and its potential tax consequences. A return of capital could be advantageous for tax purposes in the short term, but it may also indicate that the fund is not generating enough income to sustain its distributions, which could impact investor decisions regarding the allocation of their investment portfolios.
Ticker |
Amount of Distribution |
Ex-Date |
Record Date |
Payable Date |
||||||||
ACV |
|
February 9, 2024 |
February 12, 2024 |
February 28, 2024 |
||||||||
Under the terms of its Managed Distribution Plan, the Fund will seek to maintain a consistent distribution level that may be paid in part or in full, from net investment income and realized capital gains, or a combination thereof. Shareholders should note, however, that if the Fund's aggregate net investment income and net realized capital gains are less than the amount of the distribution level, the difference will be distributed from the Fund's assets and will constitute a return of the shareholder's capital. You should not draw any conclusions about the Fund’s investment performance from the amount of this distribution or from the terms of the Fund’s Managed Distribution Plan.
The Fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with ‘yield’ or ‘income’.
The Fund provides this estimate of the sources of its distributions:
Distribution Estimates |
February 2024 (MTD) |
Fiscal Year-to-Date (YTD) (1) |
||||
(Sources) |
Per Share
|
Percentage
|
Per Share
|
Percentage
|
||
Net Investment Income |
$ |
- |
|
$ |
- |
|
Net Realized Short-Term Capital Gains |
|
- |
|
|
- |
|
Net Realized Long-Term Capital Gains |
|
- |
|
|
- |
|
Return of Capital (or other Capital Source) |
|
0.180 |
|
|
0.180 |
|
Total Distribution |
$ |
0.180 |
|
$ |
0.180 |
|
(1) Fiscal year started February 1, 2024. |
||||||
Information regarding the Fund’s performance and distribution rates is set forth below. Please note that all performance figures are based on the Fund’s net asset value (NAV) and not the market price of the Fund’s shares. Performance figures are not meant to represent individual shareholder performance.
January 31, 2024 |
|
Average Annual Total Return on NAV for the 5-year period (2) |
|
Annualized Current Distribution Rate (3) |
|
Fiscal YTD Cumulative Total Return on NAV (4) |
|
Fiscal YTD Cumulative Distribution Rate (5) |
|
(2) |
Average Annual Total Return on NAV is the annual compound return for the five-year period. It reflects the change in the Fund’s NAV and reinvestment of all distributions. | |
(3) |
Annualized Current Distribution Rate is the current distribution rate annualized as a percentage of the Fund's NAV at month end. | |
(4) |
Fiscal YTD Cumulative Total Return on NAV is the percentage change in the Fund's NAV from the first day of the fiscal year to this month end, including distributions paid and assuming reinvestment of those distributions. | |
(5) |
Fiscal YTD Cumulative Distribution Rate is the dollar value of distributions from the first day of the fiscal year to this month end as a percentage of the Fund's NAV at month end. |
The amounts and sources of distributions reported in this notice are estimates only and are not being provided for tax reporting purposes. The actual amounts and sources of the distributions for tax purposes will depend on the Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund or your broker will send you a Form 1099-DIV for the calendar year that will tell you what distributions to report for federal income tax purposes.
About the Fund
Virtus Diversified Income & Convertible Fund is a diversified closed-end fund that seeks to provide total return through a combination of current income and capital appreciation, while seeking to provide downside protection against capital loss. The Fund strives to dynamically allocate across convertibles, equities, and income-producing securities. The Fund normally invests at least
For more information on the Fund, contact shareholder services at (866) 270-7788, by email at closedendfunds@virtus.com, or through the Closed-End Funds section of virtus.com.
Fund Risks
An investment in a fund is subject to risk, including the risk of possible loss of principal. A fund’s shares may be worth less upon their sale than what an investor paid for them. Shares of closed-end funds may trade at a premium or discount to their NAV. For more information about the Fund’s investment objective and risks, please see the Fund’s annual report. A copy of the Fund’s most recent annual report may be obtained free of charge by contacting “Shareholder Services” as set forth at the end of this press release.
About Virtus Investment Partners, Inc.
Virtus Investment Partners (NYSE: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. We provide investment management products and services from our affiliated managers, each with a distinct investment style and autonomous investment process, as well as select subadvisers. Investment solutions are available across multiple disciplines and product types to meet a wide array of investor needs. Additional information about our firm, investment partners, and strategies is available at virtus.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240220511772/en/
For Further Information:
Shareholder Services
(866) 270-7788
closedendfunds@virtus.com
Source: Virtus Diversified Income & Convertible Fund
FAQ
What is the ticker symbol for Virtus Diversified Income & Convertible Fund?
When is the monthly distribution payable for ACV?
How much is the monthly distribution for ACV?
What is the Ex-Date for the distribution of ACV?
How does Virtus Diversified Income & Convertible Fund maintain its distribution level?
What happens if the Fund's income is less than the distribution level?
