Monthly Distribution Announcement and Key Payment Dates
The Virtus Diversified Income & Convertible Fund confirmed a monthly distribution of $0.18 per share as part of its ongoing managed distribution strategy designed to provide investors with a consistent income stream. The ex-date and record date were set for March 16, 2026, with the payable date scheduled for March 30, 2026. This recurring monthly distribution reflects the fund’s long-term objective of delivering reliable income while balancing capital appreciation and portfolio stability. The distribution framework remains aligned with the fund’s broader commitment to predictable cash flow generation for shareholders.
Understanding the Managed Distribution Plan
The fund operates under a Managed Distribution Plan that aims to maintain a steady and predictable payout level over time. This structured approach allows the fund to distribute income to investors from multiple sources, including net investment income and realized capital gains. The flexibility of this plan ensures that shareholders receive regular payments even during periods when income or gains fluctuate due to market conditions.
However, the plan also includes an important caveat. If the combined total of net investment income and realized capital gains falls short of the targeted distribution level, the remaining amount may be sourced from the fund’s assets. In such situations, the distribution may represent a return of capital rather than earnings generated by the portfolio. This mechanism ensures consistency but also highlights the need for investors to understand the composition of their distributions.
Clarifying Return of Capital and Investor Interpretation
Investors are strongly advised not to interpret the distribution amount alone as a direct indicator of the fund’s performance. A distribution can consist of several components, and not all of them represent profits generated during the period.
Return of capital occurs when the fund distributes a portion of the investor’s original investment back to them. While this is a standard feature of managed distribution plans, it is important to understand that it does not necessarily signal poor performance. Instead, it reflects the fund’s commitment to maintaining stable payouts even during times when market income or gains may be temporarily lower.
This distinction underscores the importance of reviewing the full breakdown of distribution sources and performance metrics rather than relying solely on the headline payout figure.
Distribution Source Breakdown for March 2026
The fund provided a detailed estimate of the sources contributing to the March 2026 distribution. This transparency enables shareholders to better understand how their income is generated.
For the month of March 2026, net investment income contributed $0.010 per share, representing approximately 5.6% of the total distribution. The majority of the distribution came from net realized short-term capital gains, which accounted for $0.170 per share, or about 94.4% of the total payout.
There were no contributions from net realized long-term capital gains during the month. Additionally, no portion of the distribution was classified as return of capital. This composition demonstrates that the distribution was largely supported by realized gains within the portfolio rather than a drawdown of principal.
Fiscal Year-to-Date Distribution Composition
Looking at the fiscal year-to-date figures, which began on February 1, 2026, provides additional context. During this period, the total distribution reached $0.360 per share. Of this amount, net investment income contributed $0.020 per share, representing 5.4% of the total. Net realized short-term capital gains accounted for $0.340 per share, or approximately 94.6% of the distribution.
As with the monthly breakdown, there were no contributions from long-term capital gains or return of capital in the fiscal year-to-date distribution. These figures suggest that the fund has successfully generated gains within its investment strategy to support its managed payout policy.
Importance of Distribution Transparency
Providing a detailed breakdown of distribution sources is a critical component of investor communication. It helps shareholders understand how income is generated and whether distributions are being supported by earnings, gains, or capital.
Transparency also enables investors to make informed decisions about their holdings and expectations for future performance. By sharing both monthly and fiscal year-to-date data, the fund offers a clear picture of how its distribution policy is being executed.
Net Asset Value Versus Market Price
Performance figures for the fund are calculated based on net asset value rather than market price. This distinction is important because the market price of closed-end fund shares can fluctuate based on supply and demand, sometimes trading at a premium or discount to NAV.
By focusing on NAV-based performance, the fund provides a clearer representation of the underlying portfolio’s results. This approach ensures that performance metrics reflect the actual investment performance rather than market sentiment.
Five-Year Average Annual Total Return on NAV
As of February 27, 2026, the fund reported an average annual total return on NAV of 6.52% over the five-year period. This figure represents the annual compound return, including changes in NAV and reinvestment of distributions.
This long-term performance metric provides valuable insight into the fund’s ability to generate returns over multiple market cycles. It demonstrates the effectiveness of the fund’s diversified income and convertible securities strategy in delivering consistent results over time.
Annualized Current Distribution Rate
The fund reported an annualized current distribution rate of 8.35% based on its NAV at month end. This metric represents the current distribution level expressed as an annual percentage of the fund’s NAV.
For income-focused investors, this figure serves as a key indicator of the income potential offered by the fund. It highlights the fund’s commitment to maintaining an attractive distribution rate while managing risk and market volatility.
Fiscal Year-to-Date Total Return on NAV
The fiscal year-to-date cumulative total return on NAV was reported at 0.50%. This metric reflects the percentage change in the fund’s NAV from the start of the fiscal year through the end of the reporting period, including reinvested distributions.
Although early in the fiscal year, this figure provides a snapshot of the fund’s recent performance and sets a baseline for evaluating progress over the remainder of the year.
Fiscal Year-to-Date Distribution Rate
The fiscal year-to-date cumulative distribution rate stood at 0.70% of NAV. This figure represents the total value of distributions paid since the beginning of the fiscal year as a percentage of NAV at month end.
This metric helps investors understand how much income has been generated relative to the fund’s asset value during the current fiscal period.
Role of Convertible Securities in Income Generation
The fund’s investment strategy includes exposure to convertible securities, which combine characteristics of both equities and fixed-income instruments. These securities can provide income through interest payments while also offering the potential for capital appreciation if the underlying stock performs well.
Convertible securities can play a key role in supporting distributions by generating income and capturing gains in rising markets. Their hybrid nature makes them particularly valuable in diversified income strategies.
Short-Term Capital Gains as a Major Distribution Driver
The dominance of short-term capital gains in the distribution composition reflects active portfolio management and the realization of profitable positions. Short-term gains often result from tactical trading and market opportunities captured by the portfolio managers.
While short-term gains can be more variable than long-term income, they demonstrate the fund’s ability to capitalize on market movements to support its distribution goals.
Tax Considerations and Reporting
The distribution figures provided in the notice are estimates and are not intended for tax reporting purposes. The final classification of distributions for tax purposes will depend on the fund’s investment results throughout the remainder of the fiscal year.
Investors will receive a Form 1099-DIV detailing the actual distribution breakdown for federal income tax reporting. This document will provide the official classification of distributions as income, capital gains, or return of capital.
Potential Changes in Distribution Sources
Because the figures provided are estimates, they may change based on investment performance, market conditions, and tax regulations. This dynamic nature underscores the importance of reviewing final tax documents rather than relying solely on interim estimates.
Investors should remain aware that distribution sources can vary throughout the year as portfolio positions evolve.
Importance of Reinvestment in Total Return Calculations
Performance metrics assume the reinvestment of all distributions, which plays a crucial role in compounding returns over time. Reinvesting distributions can significantly enhance long-term growth by allowing investors to benefit from the power of compounding.
This assumption provides a standardized way to compare performance and evaluate the effectiveness of the fund’s strategy.
Long-Term Perspective for Income Investors
For income-focused investors, consistency and reliability are often as important as growth. The managed distribution plan is designed to provide predictable income while still allowing the portfolio to pursue capital appreciation.
Maintaining a long-term perspective is essential when evaluating performance and distribution sustainability.
Portfolio Management and Market Conditions
Market conditions can influence the balance between income, capital gains, and return of capital in distributions. Active portfolio management plays a critical role in navigating changing environments and identifying opportunities to generate returns.
The fund’s ability to adapt to market conditions helps support its distribution objectives over time.
Evaluating Distribution Sustainability
Investors often evaluate sustainability by examining distribution sources, NAV performance, and long-term return metrics. A distribution supported by income and gains is generally viewed as more sustainable than one relying heavily on return of capital.
The absence of return of capital in the reported period may be viewed as a positive indicator of distribution support.
Investor Communication and Ongoing Updates
Regular updates and disclosures help ensure that investors remain informed about distribution policies and performance. Transparent communication strengthens investor confidence and supports informed decision-making.
About the Fund
Virtus Diversified Income & Convertible Fund is a diversified closed-end fund that seeks to provide total return through a combination of current income and capital appreciation, while seeking to provide downside protection against capital loss. The Fund strives to dynamically allocate across convertibles, equities, and income-producing securities. The Fund normally invests at least 50% of total managed assets in convertibles and has the latitude to write covered call options on the stocks held in the equity portion. The Fund has a limited term and will terminate on the first business day following the 15th anniversary of the effective date of its registration statement, May 22, 2030, absent approval by the Fund’s Board of Trustees to extend the Fund’s term by up to 12 months. Virtus Investment Advisers, LLC, a registered investment adviser affiliated with Virtus Investment Partners, Inc., is the investment adviser to the Fund and Voya Investment Management is its subadviser.
For more information on the Fund, contact shareholder services at (866) 270-7788, by email at closedendfunds@virtus.com, or through the Closed-End Funds section of virtus.com.
Fund Risks
An investment in a fund is subject to risk, including the risk of possible loss of principal. A fund’s shares may be worth less upon their sale than what an investor paid for them. Shares of closed-end funds may trade at a premium or discount to their NAV. For more information about the Fund’s investment objective and risks, please see the Fund’s annual report. A copy of the Fund’s most recent annual report can be accessed through the Closed-End Funds section of virtus.com and may be obtained free of charge by contacting “Shareholder Services” as set forth at the end of this press release.
About Virtus Investment Partners, Inc.
Virtus Investment Partners (NYSE: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. We provide investment products and services from our investment managers, each with a distinct investment style and autonomous investment process, as well as select subadvisers. Investment solutions are available across multiple disciplines and product types to meet a wide array of investor needs. Additional information about our firm, investment partners, and strategies is available at virtus.com.
