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Gabelli Utilities AAA Message Board

  • mkfk845mr8mfj4 mkfk845mr8mfj4 Jun 7, 2013 11:18 AM Flag

    I see no dividend increase ?


    Looks like a troll posting BS. The dividend is still .07

    This topic is deleted.
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    • mintwaxed115 Jun 16, 2013 8:13 PM Flag

      Don't expect to see a dividend increase. It is my opinion that the fund manager wants to keep the distribution at a steady and constant seven cents. Although they do not refer to it as such, the fund behaves like a "managed distribution" where the dividend is held constant at roughly six cents ROC with the balance of one-cent comprised of income & cap gain. Why would anyone want a fund with 85.71% of distribution as return of capital? The answer is tax advantage. The IRS considers ROC to be "non-dividend" distributions and as such, are tax-free. However, you do have to reduce your cost basis accordingly by the amount of ROC received. This effectively shifts the tax obligation to capital gains when shares are eventually sold. Just about everyone who invests has carry forward capital loss that can be utilized via GABUX's ROC component. If shares are held indefinitely, a point will be reached where you have a zero-cost basis. This is not allowed under the tax code so any distributions received after you hit zero cost are treated as capital gains and will be due in that taxable year when you file. As for the fractional income portion of distributions, typically it falls under the category of "qualified dividends" which receive special tax treatment. So between non-taxable ROC and qualified dividends, GABUX is an excellent vehicle for tax deferral. To avoid ever hitting zero cost basis, simply reinvest or add new money to the fund as necessary.

    • Why do you insist on using Question Marks when you are making a statement?

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