I'm a long-time owner of the MFS Total Return fund. This is a well-respected mutual fund with a usual 60-40 split between stocks and bonds/cash. So the fund generates a fairly generous income stream.
Many years ago a personal holding company founded by my grandfather and uncle merged with the Total Return fund. The fund got a bunch of quality stocks, and the personal holding company received Total Return Fund shares equal in value to what the stocks were worth.
(The fund absorbed all of the capital gains from the stocks, a big benefit to the personal holding company.)
After my mother died in 1985, I inherited one-half of her Total Return Fund shares. My sister inherited the other half.
So I have a lengthy experience with the fund, which is appealingly conservative and dependable. That's why my uncle, a New England businessman, chose the Total Return Fund to merge the personal holding company with, part of the Boston-based Massachusetts Financial Services.
Thus it was surprising when I noticed recently that the monthly Total Return Fund dividend had dropped significantly on July 29, 2021 from what it had been for many years before.
Sure, the amount of money my wife and I would get bounced around some as the distribution amount changed, but the changes were very gradual. In this case, though, what we got dropped 53% in a single month. Highly unusual.
When I checked the Total Return Fund page on the MFS web site on September 1, the funds distribution history showed a .019 per share rate (rounded off) for both July and August, while the rate in June was .035.
Curious about this disturbing change, I spent 20 minutes on hold until I was able to talk with a MFS customer service representative. She simply told me to talk with my financial advisor (MFS doesn't sell shares in its mutual funds directly to individuals). So I did that.
I emailed Steven, my advisor, two questions.
One was why the Total Return Fund had such a sudden large drop in its monthly distribution, and whether this drop was temporary or long-term. The other question was why, when I multiplied the distribution amount shown on the Total Return Fund web page by the number of shares we owned, the amount that appeared in our brokerage account was considerably less -- something I'd never checked on before.
Being a financial advisor, Steven was able to talk with someone at MFS. However, he didn't learn much. In a email from Steven, I was told:
The fellow I spoke with at MFS was unable to provide me with a cogent explanation as to why the dividend payout per share dropped almost in half in July 2021 and said it probably was due to a board decision that reset payouts on a new frequency, divs can be decided on a quarterly or yearly basis and the payments can be uneven month to month, etc. This is not unusual since numerous factors constantly affect market prices and dividend payouts, some knowable in advance and some not.
OK. I figured that I'd just have to wait and see if the monthly dividend changed over the next few months. That left the question of why the amounts that showed up in our brokerage account were different from what I calculated we should be getting based on the figures on the Total Return Fund web page.
Today I learned what the problem was. Here's how I explained it in an email to Steven. But I still have no idea why the Total Return Fund monthly distribution has dropped so much. If anyone knows the reason, I sure would like to learn it.
Steven, wanted to mention a curious finding. When I went back to look again at the MFS Total Return web page today, I noticed that the monthly distribution figures had changed from what I reported to you. They now show .014 for August and .030 for June. When I multiply those figures times our number of shares I get the exact dollar amount that went into our brokerage account.