Gentlemen Prefer Bonds

Sold BST (3.78%)

BST has had a great year, outpacing the S&P 500 for Total Return. I was planning to keep it unless the yield fell too low, or the price went too high (versus the NAV). However, as one of our Armchair Insider Lounge members pointed out, they’re changing their distribution policy. 

The nature of the change is unclear, but per their press release linked below, they included the word “income” and deleted the phrase “current income” from their objectives. On a related note, they won’t be using options to generate income for the fund. These changes are effective tomorrow (Nov 10, 2025).

The BST Press Release is linked here:

What does this mean? 

I don’t know…and that’s the point. They may reduce distributions, keep them the same, or increase them using capital gains and/or return of capital instead of option premiums. The net effect may be good or bad, but I’m not comfortable holding an income investment without knowing how it works. 

Down the road, if the policy is clarified, and it remains a desirable income investment, I’m open to buying back in.

To learn more about BST and changes to their distribution policy (pros and cons), here’s a link to analysis of BST by Nick Ackerman on Seeking Alpha:

Sold DX.C (3.2% Allocation)

Love is a strong word, but I really really like this preferred stock. As mortgage REIT’s go, Dynex Capital is good. This past year it has outperformed the S&P 500!

Not bad for a lender. However, that price action is a roller coaster and mREIT’s are generally too risky for my taste. Their preferred share however, has been rock solid. Lower yield, lower risk, and almost no volatility.

I want to hold DX.PR.C forever, but it has become a little too popular, and the price shot past $26. Preferred shares are supposed to hover around their $25 par value if they’re “Callable”. This is another word for “Redeemable”, meaning the issuer has the right to buy the preferred share back for $25. 

As I write this, DX.C is priced at $26.11. If Dynex Capital “Called” this preferred share, a shareholder would only receive $25 plus accrued and unpaid dividends. It’s a small risk, but the higher price goes, the greater the risk becomes.

Bought ADAMH (3.2% Allocation)

This is a simple switch…

Sold mREIT the DX Series C preferred shares as explained above, and bought mREIT corporate bonds (ADAMH). 

Mortgage REIT’s (mREIT’s) invest in real estate loans (as opposed to physical real estate). They generate income from the spread between their cost of debt, and the interest they receive from the mortgages (or mortgage backed securities) they hold. The yields are far higher (often more than 10%) than regular REIT’s, but the dividends are less reliable, and the prices are volatile. I generally avoid holding mREIT common shares.

However, the preferreds and bonds issued by mREIT’s are a different story. Their income doesn’t rise and fall with the profitability of the business. They pay shareholders based on the terms defined in advance (eg. 7% of $25 per year, paid quarterly, or SOFR + 5% of $25 per year, paid quarterly). There’s no change to the distribution policy unless the business itself comes under threat. In that scenario, the distributions for the common stock would need to go to zero before the preferred or bond dividends were at risk.

ADAMH is one of several bonds issued by Adamas Trust (formerly known as New York Mortgage Trust). The common stock yields 13.14%, and the ADAMH bond currently yields 9.71%. The income is fixed at 9.875% of $25 per year, paid quarterly.

Further information about the types of single family and multi family loans held by Adamas Trust can be found on their website, here: 

Full terms of the ADAMH bond are available at Quantum Online, here:

UTF: Increased Allocation (from 2.16% to 4.05%)

Adding to last month’s purchase of this utility fund. The price remains attractive at a 7.6% discount to NAV. The recent price dip was caused by a rights offering. These tend to confuse investors, and result in some short term selling.

With the exception of the 2008 recession, UTF has a 21 year history of consistent distribution payments. 

If you want to learn more about UTF, here’s a review.

QDVO: Increased Allocation (from 2.06 to 3.96%)

This covered call ETF is a blend of growth and income (much like BST). It’s only been around since August 2024, but it is leading the pack of tech focused income funds. Despite offering a current yield of 9.5%, over the past year it has outperformed the NASDAQ 100 for Total Return.

Typically, a covered call fund would underperform a benchmark index because it's selling some of the upside in exchange for current income. The implication is that the stock selection for this actively managed fund is its advantage. Whether this is sustainable over the long term, or during a major correction remain to be seen. So far, it handled the tariff correction in April 2025 like a champ.

If you want to learn more about QDVO, here’s a review: