How does leverage impact the amount of the dividend?
Each Fund uses leverage to enhance returns to the shareholders. Most of the time, the Funds are able to borrow money through their issuance of preferred securities at rates well below the rates we can earn on the investment portfolio. Of course, the benefit of leverage is greatest when the “spread” between the income generated by the portfolio and the cost of leverage is wide. However, the converse is also true; leverage doesn’t provide as much income when the spread is narrow.
