LGI's 10.8% Dividend: A Steady Income Machine or a Risky Gamble?

The Lazard Global Total Return & Income Fund (NYSE: LGI) is a name that pops up in conversations about high-yield investing. With a dividend yield of 10.8% as of May 2025, it’s no wonder investors are lining up for what appears to be a cash machine. But here’s the catch: not all dividends are created equal. Let’s dissect LGI’s strategy to determine whether this fund is a goldmine or a mirage.

The Dividend Machine: Consistency Amid Complexity

LGI has paid monthly dividends since at least 2014, a streak that’s no small feat in volatile markets. Its Managed Distribution Policy guarantees these payments, making it a favorite for retirees and income hunters. But dig deeper into the distribution composition, and the picture gets murkier.

As of April 2025, 63% of LGI’s cumulative distributions were classified as return of capital (ROC)—a term that means the fund is returning your own principal to fund payouts. While ROC isn’t inherently bad, it’s a warning sign when it constitutes such a large chunk of distributions. The remaining 37% came from long-term capital gains (34%) and short-term gains (3%).

The High-Yield Game: Risks and Rewards

Let’s start with the positives. LGI’s 10.8% yield is a siren song in a world where 10-year Treasury bonds offer less than 4%. The fund’s portfolio, invested in 60–80 global equities, including tech giants like Apple and Microsoft, offers diversification that many individual investors can’t replicate. Plus, its Managed Distribution Policy ensures steady cash flow—critical for income-focused investors.

But here’s the rub:
1. Expense Ratio: At 2.16%, LGI’s costs are steep. That’s nearly double the average for equity funds. High fees eat into returns over time.
2. Leverage: The fund uses 9.2% leverage, amplifying gains in bull markets but magnifying losses in downturns.
3. ROC Dependency: A 63% ROC component means payouts are eating into your principal. If the fund’s NAV declines, this could lead to taxable gains even as your investment loses value.

The Historical Dividend Record: Growth and Volatility

LGI’s dividend history is a rollercoaster. From $1.28 in 2020 to a peak of $2.09 in 2022, it delivered strong growth—until 2023, when payouts dropped to $1.12, a 46% decline. The rebound in 2024 to $1.47 suggests management is fighting to stabilize payouts.

The Bottom Line: Is LGI Worth the Risk?

LGI is a high-octane income play, but it’s not for the faint-hearted. Here’s the calculus:
- Pros:
- 10.8% yield with monthly payouts.
- Global diversification in top-tier equities.
- A proven track record of consistent distributions.

• Cons:
• High fees and leverage that could bite in a downturn.
• Heavy reliance on ROC, which erodes principal.
• A volatile NAV—its cumulative return was -1.25% through April 2025.

The Cramer Verdict: Buy, but Proceed with Caution

LGI is a fund that divides investors. If you’re chasing income and can stomach volatility, it’s a contender. But here’s the action plan:
1. Set a strict stop-loss: With leverage and high fees, a market correction could hurt.
2. Monitor ROC levels: If ROC exceeds 70%, consider exiting.
3. Diversify: Don’t put more than 10% of your income portfolio into LGI.

Final Word

LGI is a high-risk, high-reward bet. For aggressive income investors, it’s a tool to turbocharge cash flow—but it’s no “set it and forget it” investment. Proceed with eyes wide open, and remember: when a fund promises double-digit yields, there’s always a catch.

Act now if you’re ready to gamble on the next payout—but don’t bet the farm.