I came across Boulder Growth & Income Fund (BIF: chart, web, Y!) while browsing through some investment discussion boards.

Boulder is a closed-end investment management company that primarily invests in domestic common stocks, corporate bonds, and United States treasury bills. The fund also invests in various foreign common stocks. Its portfolio consists of investments in beverages, RICS, financial services, food, insurance, manufacturing, REITs, S&L, retail, and pharmaceutical industries.

BIF caught my eye quickly when I saw they are paying a 12.5% dividend in monthly installments, much like my Cornerstone Strategic Value Fund (CLM: chart, Y!) holdings. Naturally the dividend payout fits in nicely with my retirement holding strategy.

Only recently has BIF started a regular monthly payout. Up until May of this year, the distribution has been sporadic at best.

It’s interesting to note that the stock traded at a discount to the net asset value (NAV) until the fund started paying a regular monthly dividend. Now it’s trading at a premium, much like CLM.  The difference is that the BIF net asset value still shows signs of increasing, while the CLM NAV is falling off while the stock price is climbing.  Not a good combination for CLM.

BIF Nav/Discount Chart

BIF Share Price vs. NAV

Source: ETFConnect

Insiders have been buying up BIF in fairly regular and healthy installments.  There is a wide array of institutional holders, but the mutual fund following is nearly non-existent.

BIF has a fairly healthy income statement and balance sheet, with $2.92 million worth of income over the last 12 months, a dilluted EPS of 0.94, no debt, and $670,000 in cash on hand for the last quarter.

The only red flag I see is that the fund payout is nearly 100% return of capital, meaning it’s not really paying a dividend, but rather giving you your money back.  Naturally, when a company gives you your initial capital back without taking shares, it would seem that the value of the shares should godown.

This is the case with my CLM holdings as well. The CLM payout ratio (POR) is also near 100% making their distributions a return of capital rather than a true dividend.  This may be OK for some, but at some point they won’t have any cash left to cover their payouts, and they’ll have to start selling assets to cover the distributions.  Unless of course they cut the dividend, at which point the shares become much less attractive and the price will fall.

That said, as long as they keep the payouts coming, BIF is a prime candidate for my next Roth IRA contribution.

I’ll continue to research the plusses and minuses of seeing a ROC rather than a dividend payout and keep my readers informed.  If someone has some insight as to why my concerns are off base, please chime in!

Additional Resources:
ETFConnect: BIF
The Boulder Funds Homepage

Disclosure: I own shares of CLM but not BIF.

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