Holders of the Putnam Master Intermediate Income Trust (PIM) did not have a great week as the fund cut its distribution by nearly a quarter.
The fund has what it calls a “targeted distribution” where it distributed a flat $0.03 per share for the last 18 months.
In a sense, this should not be surprising – the fund is majority investment-grade with a distribution rate on NAV of around 8%. This is not the kind of math that ensures good distribution coverage. In fact, judging by the Section 19a’s and the shareholder report the coverage has been around 50-60%.

Some investors may be surprised by the cut but ultimately, it is up to management to set their distribution. The only regulatory requirements have to do with the fund paying out >90% of taxable income and >98% of realized gains. If the fund overdistributes it can easily move the distribution lower and that’s pretty much what happened.
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