High-Yield or High-Risk? Virtus Convertible & Income Fund Fails to Cover Distributions – Caution Advised!

Boston, Massachusetts – The Virtus Convertible & Income Fund, traded on the NYSE as NCV, offers income-focused investors an opportunity to achieve high current income from their portfolios. With a current yield of 12.83%, the fund stands out among its peers in the market of closed-end funds.

Comparing the Virtus Convertible & Income Fund with similar funds such as Advent Convertible & Income Fund, Calamos Convertible & High Income Fund, and Ellsworth Growth and Income Fund, it is evident that the Virtus fund boasts a higher yield. However, a high yield relative to peers may indicate potential challenges in sustaining distributions, urging investors to proceed cautiously.

In terms of performance, the Virtus Convertible & Income Fund has faced challenges, with shares declining 1.85% since a previous article in January 2024. This underperformance compared to benchmark indices like the S&P 500 Index and the iShares Convertible Bond ETF raises concerns about the fund’s ability to deliver returns.

Analyzing the fund’s distribution history, it is evident that the fund has experienced a steady decline in distributions over the years, raising doubts about its sustainability. With a trend of failing to cover distributions, investors may question the fund’s long-term viability and potential for consistent income generation.

Additionally, leveraging assets as a means to enhance yield exposes the fund to risks, especially considering its leverage ratio of 36.95%. While leverage can boost gains, it also amplifies losses, requiring a balance to manage risk effectively.

Despite trading at a 12.33% discount to net asset value, the Virtus Convertible & Income Fund may not be an ideal choice for income-seeking investors due to its track record of failing to cover distributions and depleting its asset base.

In conclusion, the fund’s performance and distribution challenges highlight potential red flags for investors seeking consistent income. While the fund’s unique strategy sets it apart, its struggles to sustain distributions and cover expenses raise concerns about its ability to deliver long-term value. Investors are advised to exercise caution and conduct thorough due diligence before considering investment in the Virtus Convertible & Income Fund.