Evergreen Global (EOD): Double-Digit Yields

"The bond market has received record inflows during the past few months -- pushing up prices and pushing down yields. Meanwhile, companies have been reporting solid earnings growth -- giving their stocks a solid foundation for continued growth.

"But investing in equities doesn't mean you have to sacrifice income as EOD clearly demonstrates.

"EOD invests in global equities, focusing on companies with attractive dividend policies and/or those with the potential to grow their dividends over time. About 60% of the fund is invested in common shares, while the balance is invested in preferred stock.

"Along with its long-term stock holdings, the fund also takes some short-term equity positions, timed to capture a dividend payout. And to boost its income even more, it also writes call options against roughly 45% of its equity portfolio.

"The majority of EOD's common stock holdings hail from global utility companies such as Italy's Enel S.p.A., which has a presence in 22 countries, serving nearly 61 million power and gas customers.

"It also holds a number of telecoms, including France Telecom. It also holds preferred stock in dozens of U.S. utilities like Connecticut Light & Power and Warren Buffett's MidAmerican Energy Company. You'll also find preferred shares of financials such as JPMorgan Chase and Wells Fargo Capital.

"EOD currently pays a quarterly dividend of $0.28 per share for an annual payment of $1.12 per share. At current prices, the yield for the fund is a lofty 10.5% yield ($1.12/$10.65). And one of the things I absolutely love about this fund is that its distribution is coming entirely from income.

"You can imagine how hard it was for dividend-oriented funds to maintain distributions during the economic downturn. Companies were cutting or suspending their dividends by the droves.

"A lot of funds, however, continued their distribution rates, supplementing their lost income by paying back some of the fund's capital. But this shortsighted "return of capital" dividend strategy caused longer-term problems for the funds.

"They had less capital invested when the rebound came. Because they didn't fully participate in the rebound, they are still short the income required to cover their dividends.

"EOD, however, bit the bullet. The fund cut its quarterly dividend from $0.50 per share to $0.28 share in June 2009. Now this, unto itself, doesn't guarantee a safe dividend from here on out. But EOD is using its capital to maximize income. And that's a strategy I can embrace.

"Ovwrall, EOD's portfolio is relatively safe as equity portfolios go. But the fund is downright aggressive about maximizing income. EOD won't trade ex-dividend until June, so investors have some time to check this fund out. But I'm going to lock in my double-digit yield now and buy."

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