gabux is an open end fund and phk is a closed end fund currently selling at a premium to NAV.
Which is the better fund to own,in your opinion?
I have no position in gabux,but I do have a position in PHK.
For me the question as you ask it isn't the "right" question. PHK and GABUX are apples and oranges. Which is "better" for what?
PHK is a high yield bond CEF and has had excellent returns and is currently bought at a 41.7% premium above its NAV (second highest among all taxable income CEFs). It pays monthly with a current annual yield of 10.82% on its share price and has no managed distribution policy.
GABUX is an open end utilities mutual fund bought at NAV with a managed return policy with an annual yield of 12.41% paid monthly.
Which is better? Depends on your objective, your asset allocation strategy and how it fits into that strategy.
Hi Fred, Agree but will add that GABUX pays out 12% or so, most of what it pays each month is ROC. Not earned dividend or interest. Granted, a little bit is sometimes capital gain as well. BTW, GABUX was one of the top five utility mutual funds in AAII latest Top Mutual Funds listing...
also, be aware that you will need to keep track of your cost basis in GABUX. When you sell GABUX you will pay capital gains on the difference between your adjusted cost basis and the then NAV... I wouldn't recommend reivesting distros but I would add periodically instead...easier to keep track of your basis that way. Unless of course your broker does it for you or its in an IRA.
Approximately, yes. Some of the dividend income is capital gain income so it may not all be included in one number. Take a look at the tax info that is on the Gabelli fund family website they provide a breakdown of the monthly distribution and you can see the small variances yourself.
BTW I sold my GABUX position, but will be buying it back later in the year. Made a decision to load up on a couple of small oil companies, I'm hopeful that pending news will deliver a nice short term gain.
So of the $13,000 I originally invested and the monthly dividend income of $140 or $1680 per year,will a '1099'say yearly dividend income for GABUX is $240($20 monthly)or $1680 for year 2011?
the monthly payout consists of about 1 cent of dividend income and periodically a little capital gain and usually 6 cents or "return of capital" or ROC. ROC is by definition a return of the money you put in. The question is though, what is the source of the capital in ROC? Obviously, it comes from the investors, but IMO most of the capital paid back is coming from washing portfolio transactions within the fund. In other words mgt buys and sells positions, offsetting gains with losses. The resulting cash is paid back to investors as ROC. If you read the prospectus, it shed a little light on why we don't see all the dividend income the portfolio generates (its reinvested and fund pays the tax on it).
So are you saying that the
dividend consist of a return of our
own money or is this other part of
the div. coming from capital gains
that the company earn by selling
shares. All a bit confusing.
All comments welcomed.
With GABUX you do not get a "$140" dividend on 2k shares. You get $20 dividend (with capital gain sometimes mixed in) plus $120 return of capital(ROC)... What we all expect is that GABUX underlying investments keep up or exceed the payout rate of the ROC. If so, NAV will rise, if not it won't.
I held PHK in 09 but the premium had me concerned so I sold it all. Bill Gross and Pimco have a great reputation but I just couldn't justify 40+ percent over NAV. I've got a large position GABUX and am happy with it, but the bulk of my money is in a sister fund to PHK at Allianz, NCZ.
I noticed that NCZ is selling at a 12% premium to NAV which is still better than PHK's premium to NAV.But I think I would feel more comfortable in an open end fund where there is no premium to NAV,like GABUX or GAUCX.Schwab won't allow GAUCX to be purchased,only redemptions.Once I sell PHK I'll buy GABUX.
Beware of things selling at a premium. While this may reflect investor confidence in paying more for the stock than it's worth, they typically fall the hardest when things get ugly.
Check the chart: PHK vrs GABUX: http://finance.yahoo.com/echarts?s=PHK+Interactive#chart2:symbol=phk;range=1y;compare=gabux;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
PHK is more volatile than GABUX which is good for day trading, but I am more comfortable with things LESS volatile unless they are going straight up, which rarely happens to me. I can get warm and fuzzy with an equity when the chart doesn't zig zag a lot. Just my opinion and worth what you paid for it. No warranties expressed or implied.
I own both. Have some cash to buy when they take a hit. Monthly dividend is the same, % is higher when price declines.
It's important to note that both have continued to pay their dividends monthly for years.