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for over ten years. Great holds for Americans in your IRA, and a great hold for rubes and suckers in a taxable account, like me. I believe it would have been better for these CEFs to aggressively buyback their shares and pay a smaller dividend, but it worked out well.

" Summary
Adams Diversified Equity Fund, Central Securities Corporation, and General American Investors Co. Inc. are longstanding equity CEFs, each outperforming the S&P 500 over the past decade while trading at notable NAV discounts.
CET currently offers the widest discount at -17.5% and the highest 10-year total return, making it an attractive entry for growth-oriented investors.
ADX provides consistent quarterly income, a low 0.5% expense ratio, and a tech-heavy portfolio, with a 2024 distribution yield of 10.9%.
GAM is more diversified beyond tech, uses modest leverage, and actively repurchases shares, but its current discount is narrower than historical averages."



https://seekingalpha.com/article/4855395-3-old-sch...

o/t, I have been touting ADX and CET...
for over ten years. Great holds for Americans in your IRA, and a great hold for rubes and suckers in a taxable account,



Sadly, not true. At all. You should have been touting FCNTX.

1993-01-29 - 2025-12-23      $10,000 initial.  All dividends reinvested.
Symb  End value CAGR  MaxDD volatility
CET   $280,053  10.66%  -57%  18%
ADX    $90,583   6.93%  -72%  78%
GAM   $136,203   8.26%  -67%  19%
FCNTX $770,901  14.12%  -49%  18%
SPY   $283,937  10.71%  -55%  19%

 
https://testfol.io/?s=bJjp6D4q4WA
click "Logarithmic scale" on the chart

CET matches SPY, and both beat ADX & GAM.

FCNTX beats them all.

Last 10 years, CET, ADX, and FCNTX are almost the same in Total Return. https://testfol.io/?s=bJjp6D4q4WA

Same period, CET, ADX, & GAM, take dividends, not reinvest. CET handily beats ADX & GAM.
Ditto for the entire period since 1/29/1993. In fact, ADX is by far the worst.


Adjust for CPI inflation, 5% annual withdrawal monthly is sad ^h^h^h Terrible.
https://testfol.io/?s=dRrPOqgc0ss

4% is better, ADX is the only one that crashes. The other two just barely survive.
CET matches SPY, and both beat ADX & GAM.

2024 distribution yield of 10.9%.
Too bad about losing all your money long term. ;-(

Takeaways:
* Investing for current income is very expensive.
* You need to backtest the claims for investments.

Ah, you are the same guy that is banging the drum for Berkshire to start paying a dividend.

Noted.

“ You should have been touting FCNTX.“ When did u start touting FCNTX, I might have missed it? Thank you, I shoulda bought tsla too no? No div hence I wouldn’t be a rube and a sucker.

Well, actually I don't think I have every touted anything.

I just use FCNTX as the benchmark when backtesting things that other people write about and talk about.

Also, FWIW, I do not care about dividends at all. Cash is cash. You can convert shares to cash at will, in an amount and timing of your own choosing.

"Investing for current income is very expensive."

Does it not depend on what you buy? My personal example is KMI. Years back when energy related stocks had a really bad stretch I started buying KMI in the low teens with close to a 7% dividend yield. As it kept going down I continued to buy...the stock price bottomed at just under $10 where much to my regret I only added a few hundred shares more. Fast forward to today and the stock price is $27 and every year there has been a small dividend increase.

Pretty simple philosophy that Rich Kinder has followed at KMI. Use free cash flow to continue to invest in and expand the business, bolt on acquisitions that are accretive to earnings, repurchase shares at opportunistic prices, and pay a dividend to shareholders.

Hard to believe that one could buy a dividend paying stock with income in mind and also end up with a nice capital return on it. UCMTSU

“ Hard to believe that one could buy a dividend paying stock with income in mind and also end up with a nice capital return on it. UCMTSU“. You know what pt Barnum said, and I own KMI we well, rubes.

"Investing for current income is very expensive."

Does it not depend on what you buy? My personal example is KMI.

That's the one that had the two stock classes. The class that got the dividend in shares instead of cash could immediately sell those shares and get more cash than the other class got.

“ No, Kinder Morgan has not had two classes of common stock for dividends. It operates under a "one-share-one-vote" system for its common stock, meaning each share has equal rights.
However, there were different structures and unit classes when the company was a complex set of Master Limited Partnerships (MLPs) before its 2014 consolidation:
Before the 2014 Consolidation: Kinder Morgan was primarily composed of several publicly traded entities, including Kinder Morgan Partners (KMP), Kinder Morgan Energy Partners (KMR), and El Paso Pipeline Partners (EPB), with Kinder Morgan Inc. (KMI) as the general partner.
Partnership Units: KMP's partnership agreement required it to distribute all available cash after each quarter and had different classes of limited partner interests, including common units, Class B units, and i-units. While the common and Class B units received cash distributions, KMR received distributions in the form of additional i-units.
Current Structure: In a major transaction in November 2014, KMI acquired all of the outstanding units/shares of its controlled entities, simplifying the structure into a single C-corporation, Kinder Morgan, Inc. (KMI).
Since the consolidation, KMI has a single class of common stock and pays consistent quarterly cash dividends to all common stockholders equally. “

You know what pt Barnum said, and I own KMI we well, rubes.

Rubes indeed. Look what KMI has done vs. FCNTX and SPY. https://testfol.io/?s=f0h0rT2inFu

Even better if you grabbed KMI at the low. https://testfol.io/?s=f0h0rT2inFu
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"Facts are stubborn things." -- John Adams

Who wouldn't like to invest for dividends for 10 years and leave $20,000 on the table?

As always it depends on when and why one bought. My first KMI purchase was in 2019 so did not own when there were multiple classes/different companies, etc. At the time it looked like a great way to establish a bond like position with a generous yield (7+%) along with the opportunity for price appreciation. Fast forward to today and with the dividend increases the yield is well over 8% per year and the stock has more than doubled. As I'm very positive about their future prospects this will likely be a forever hold for me. I'm always trying to project what is ahead so have no idea as to how back testing helps one identify good companies to make long term investments in but if he works for you then keep at it.

Going back many years I was fortunate to meet a number of stockbrokers who I would describe as "grizzled veterans." They had done well through multiple market cycles. A common theme was that one should try to have a portfolio that provided what they called a "total return." It was very simple...total return was long term stock price appreciation along with a growing dividend. They were trying to identify and buy the same types of stocks that WEB did with the difference being that WEB rarely made any mistakes. They also stressed the importance of receiving dividends during market downturns. Of course that was a time when people were actually investing as opposed to the get rich quick casino like scenario that we have today.

I'm not trying to be argumentative (he said), but Fidelity shows KMI yield is 4.3% not 8%.
(You are not one of those people who thinks "yield on cost" is a thing, are you?)


Awkwardly, the 1st 2 news items are downgrades, one for lower price target, one for downgrade from rom NEUTRAL to SELL. If you care about those things -- opinions from professionals.


A common theme was that one should try to have a portfolio that provided what they called a "total return." It was very simple...total return was long term stock price appreciation along with a growing dividend.

Yes, all the professionals themed that "total return" was the target. But they didn't say total return was what you said. I absolutely doesn't include anything like "a growing dividend".
Normally it means price appreciation with all dividends reinvested.
Simpler to compute and good enough for a first approximation is price appreciation with all dividends added back in.

One thing I have never quite understood.
Studies claim that about 70% of people reinvest the dividends. If that's the case then there is no reason to care about the dividend, since the money is going to stay in the company.

Two things. If you are investing for income, then the price action is important, since at the end of the day the overall return is going to be dominated by what the price is when you sell it. It does no good if it totalled $20,000 in dividends but took $25,000 of capital loss. Which, sadly, has happened with many many "income-focused" CEFs and ETFs.

Eh, whatever. De gustibus non est disputandum.

KMI: if one purchases the stock today the dividend yield is 4.3%. I was buying in 2019-2020 and ended up with an average cost of $12.91. The company recently announced that it plans to pay a $1.19 per share dividend in 2026 which based on my cost is a 9.2% yield.

As far as KMI their business has a huge moat....extremely difficult to get approval/permits/etc. for pipelines and I've always viewed it as a "tollbooth" with no exploration risk. If the demand for energy increases then KMI's business will benefit. When the stock price was in the low teens I recall listening to the CC's and Rich Kinder was in disbelief about the valuation.

Bottom line is that I have owned it for 6 years and the price of the stock has more than doubled. Every quarter I receive the dividend payment and the dividend yield on my shares is now 9+% with the possibility of future increases. I'll take that outcome every time.

A quick tidbit about analyst downgrades. A few years back an analyst downgraded KMI citing their additional spending on future projects, etc. (per his logic investing in the business was a bad thing) and how earnings would be a few pennies short of what he expected. Amusingly enough following the downgrade the stock dropped around 5%. Those projects are now being completed and have been and will be increasing earnings. Occasionally an analyst will make sense (Mike Mayo was absolutely pounding the table on Citigroup) but as a general rule I don't pay much attention to them.

Bottom line is that I have owned it for 6 years and the price of the stock has more than doubled. Every quarter I receive the dividend payment and the dividend yield on my shares is now 9+% with the possibility of future increases. I'll take that outcome every time.

Clearly you are double counting your good fortune.

Elann,

I'm always willing to learn. Can you share your math/reasoning? What is being "double counted?"

I'll give another example. Let's say that on 1/1 you loan me $100 and we agree to a 10% interest rate with the interest being paid immediately and that I have to pay you back by 12/31. Do we agree that your return/yield on your $100 is 10%?

Time goes by and it is 12/31 and I don't have the $100 to pay you. You're flexible. You say OK how about if we extend the loan 1 year but you have to pay me $12 this time and can pay me back the $100 on 12/31 of next year.

What is your return/yield on your $100 in year 2? I could be wrong but I would say that it is 12%. Are you going to tell me that it is still 10%?

I'm always willing to learn. Can you share your math/reasoning? What is being "double counted?"

I wouldn't call it double counting, just incorrect math.

First, realize that stocks do NOT pay a yield. Rather, stocks pay a dividend. We do a calculation to normalize the numbers so we can compare different stocks, which we call "yield".

Here is how yield is defined:
"You can calculate yield using a simple formula: take whatever form of yield you have (dividends, coupons, or net rental income) and divide it by the investment’s value.
...
To calculate the yield on your stock investment, use the following formula:
Dividends per share / stock price x 100"

Notice it says "stock price", not "basis".
What you paid is not in the calculation. It's the current price.
The purchse price figures in the calculation of capital gain, not in the yield.

Ex: I bought XYZ in my IRA 10 years ago for $10/share. I bought XYZ yesterday in my Roth for $50/share. XYZ pays $1.00 annual dividend.
Am I getting different yields? No. The yield of XYZ is the same no matter which account it is in.


Here's something from a post on the old TMF board from 1999:
"Consider this scenario, which when I first read it I came to realize that yield-on-cost was meaningless.

Five years ago you bought the stock at 10, and today it is 40. The current dividend is $2.
Therefore the current yield is 5% and your yield-on-cost is 20%.
But your wife comes to you and says that last month she was logged into the brokerage account and accidently hit SELL and sold all the shares at, say, 50. She immediately realized what happened and so she immediately re-bought it luckily at the exact same price it got sold at. Whew!! (Let's say this was an IRA account so we can ignore any capital gain/loss issue.)

So you think your stock's purchase price was 10, but in reality the purchase price of the shares was 50.

Q: What is your yield-on-cost? It is figured on the 10 that you thought? Or is it figured on the 50 that is the fact but which you didn't realize up until this very minute? BTW, she was so fast on the re-purchase that it happened within a fraction of a second after the sell."



Here is why it is important to get it right, taken right out of a thread on seekingalpha. (The actual post had figures that were even more extreme.)

You hav 100 shares of a stock you bought for $10 and is now $20. It pays $0.50 annual dividend. The current yield is 0.5/20 = 2.5%.
You calculate the yield based on your cost and get 0.5/10 = 5.0%
You find that ABC is a similar stock which is also $20/sh and pays $0.60 dividend.
Should you sell XYZ and buy ABC?
You say "Heck no! I am getting 5% and ABC only pays 3.0%"

But you are not actually getting 5%.
The choices are $2000 of a stock paying you $50/yr (XYZ) or $2000 of a stock paying you $60/yr (ABC).

(The actual post had figures that were even more extreme. His figures were a yield-on-cost of around 15%, and current yield about 3.5%)

...realize that yield-on-cost was meaningless...

To be generous, I would say that it's *almost* meaningless.

A very high yield on cost is generally a sign that an investment worked out very well, over a very long time, which is a sign of a very good pick indeed, emphasizing two properties that you seek in a Buffett-type investment. It doesn't say much more than that, though.

It is indeed remarkable that the annual dividends that Berkshire gets on its Coke shares are such a high fraction of the original cost (around half?), but only as an anecdote. It's not numerically important or meaningful as such, but demonstrative of the fact that the investment worked out very well.

A better metric, rarely mentioned, is whether or not the real after-tax dividends you're received since purchase date have exceeded the real cost to buy the shares. After all, if a company can never manage that ability, it never becomes worth what you paid. (strictly speaking that reasoning requires that you count amounts which a company plainly *could* pay out but hasn't yet)

Jim

I'll give another example. Let's say that on 1/1 you loan me $100 and we agree to a 10% interest rate with the interest being paid immediately and that I have to pay you back by 12/31. Do we agree that your return/yield on your $100 is 10%?

But it ISN'T 10%!!!

He is loaning $90 ($100 - $10) on 1/1 and you are paying back $100 on 12/31. That's more than 10%, it's closer to 11.1% (IRR).

Time goes by and it is 12/31 and I don't have the $100 to pay you. You're flexible. You say OK how about if we extend the loan 1 year but you have to pay me $12 this time and can pay me back the $100 on 12/31 of next year.

What is your return/yield on your $100 in year 2? I could be wrong but I would say that it is 12%. Are you going to tell me that it is still 10%?

Again, it isn't correct. In the second year, he is loaning $88 ($100 - $12) on 1/1, and receiving $100 back on 12/31. That would be a yield of about 13.6% (IRR).

rayvt,

Thank you very much for your excellent post (#18037). I found it to be both extremely informative and helpful. I was certainly wrong/off on the terminology and even for those who do have it down pat it never hurts to occasionally review.

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