GGN's quarterly report, for the period ending 3/31/12, states that the fund "issued 2,516,131 common shares" during the quarter, which increases the total common shares by about 3.46%. The fund netted $40,461,586 on the sale of these new shares. The fund has made similar issuances in the past. Question: to what extent does the $40M in new cash, if invested in additions to the fund's portfolio, enable the fund to cover the dilution created by the new shares and maintain the 0.14/share distribution?
I am not an accountant and would like to hear some rational comment on this matter.
I have looked at the number of new shares issued by GGN for the last four years. In only one of those years did the option income generated cover the monthly dividend. In three our of four years the cash generated by the new shares helped GGN cover their dividend. While I still have some I reduced the holding by 50% until I get a better idea on where the income to pay the dividend really comes from. You are wise to question the new stock being issued.
Thanks for your observations, rlaimbeer. I'm a little more leery about holding GGN now, though I love the monthly income. Also, I think we are in the middle of a bursting gold bubble right now, which, on the bright side, could mean buying opportunities.
Unanswered question: Are the proceeds gained from issuing and selling new shares used to replace portfolio holdings surrendered in options activity, or are the proceeds used exclusively to maintain the monthly distributions, or some of both?
Another question: Who is buying the new shares?
My ability to interpret financial reports is limited.