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Gabelli Utilities AAA Message Board

  • metropolis954 metropolis954 Nov 8, 2012 10:42 AM Flag

    Don't pull the trigger just yet

    I'm guessing Friday will be a big down day so waiting and watching. Since six cents out of the seven cent GABUX distribution is ROC, I'm assuming everyone here is interested in employing ROC as a tax strategy or perhaps to offset some carry forward capital loss. Today, I'm watching ETY, EXG, EOS, and NFJ - all of which lean heavily toward return of capital as a distribution method. ROC is the preferred method to distribute income from covered call & options activity. EOS: "The Fund seeks current income with capital appreciation through investment in large and mid capitalization common stocks and through utilizing a covered call and options strategy" These buy-write closed end funds are not related to utilities but it would be an alternative for a continuation of ROC distributions if that's your strategy. Currently, I'm sitting on a pile of cash from the sale of GABUX and may decide to buy back if the price continues to decline to a ridiculously low level.

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    • I own EVV and have done well. Like any of these funds, you have to watch them and trade them when you can.

      • 1 Reply to aga0115
      • Glad you've done well with EVV. It's a very odd but interesting fund of mortgage backed securities, senior secured floating rate loans and non investment grade corporate bonds. We're all, of course, familiar with MBS; the senior loans "Floaters" adjust up or down with rates so will benefit if or when the Fed raises the short end. But by the same token, the junk bonds will probably suffer. EVV is selling at 3.13% premium to NAV with a yield of 7.29% paying 0.1042 cents monthly. Distributions are all income with no short/long cap gains or ROC. The expense ratio is a little on the high side at 1.57%. Since 2008, EVV has suffered several dividend cuts going from .1261 cents monthly to the current .1042 for a drop of 17.367%.

        The interesting thing here is that GABUX has not yet cut the dividend and is behaving like a Managed Distribution. Probably because the lion's share of the distribution is paid as ROC. I have a feeling that Gabelli will sooner or later have to resort to cutting the dividend as the Obama administration continues it's war on fossil fuel, off shore drilling, pipe lines, coal mining, etc. It's best therefore when looking for alternates to avoid focusing on dividend yield and look to funds that have already had several dividend cuts. Funds like ETY and EXG are good examples of funds that have already had several cuts. So in my opinion, it's going to take a cast iron stomach to stay with any fund that has not yet made cuts.

    • Be careful with the Eaton Vance funds they are notorious dividend cutters. I made some good money on ETY and EXG by selling both of them a few years ago. If you can buy them low and sell them high great. But, if your looking for steady income I would look at something else.

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