Gabelli GLU Fund: Questions/Opinions

[damonhowatt]

Good morning all. I've been researching dividend producing stocks and funds recently to use in my Roth IRA. I've seen one closed end fund that appears on the outside to be a good candidate: Gabelli GLU Global Utility and Income Trust. The fund currently has an annual yield of ~ 6.74% (it issues a dividend of $0.10 monthly). The price appreciation of the fund itself is very small but the dividend appears to be quite high. My initial thinking is to use this fund as part of a tax-free dividend producing strategy. Is this a good idea?

Please give me your thoughts and critique of this idea. Am I not seeing something here? I value the forum's member knowledge; you guys have been helpful in the past.

Thank you,
Steve

 

[bobandsherry]

Good morning all. I've been researching dividend producing stocks and funds recently to use in my Roth IRA. I've seen one closed end fund that appears on the outside to be a good candidate: Gabelli GLU Global Utility and Income Trust. The fund currently has an annual yield of ~ 6.74% (it issues a dividend of $0.10 monthly). The price appreciation of the fund itself is very small but the dividend appears to be quite high. My initial thinking is to use this fund as part of a tax-free dividend producing strategy. Is this a good idea?

Please give me your thoughts and critique of this idea. Am I not seeing something here? I value the forum's member knowledge; you guys have been helpful in the past.

Thank you,
Steve

Might look and see if aby of the dividend being paid a return of capital.

 

[flintnational]

It is selling at a discount to NAV but has an annual expense ratio of 1.4%.

 

[stephenson]

I invested in several Gabelli funds starting 30 years ago ... my sense now is they play off his personality ... none of the Gabelli funds has matched the market.

Costs are waaaaay too high relative to their performance.

 

[ERD50]

Good morning all. I've been researching dividend producing stocks and funds recently to use in my Roth IRA. ... My initial thinking is to use this fund as part of a tax-free dividend producing strategy. ....

Why? We've had several threads on the "dividend payer" sector, and there is no apparent advantage to them over the broad index.

.... Please give me your thoughts and critique of this idea. Am I not seeing something here? I value the forum's member knowledge; you guys have been helpful in the past.

Thank you,
Steve

Far better than my thoughts or knowledge is actual data:

https://goo.gl/1M7M9f << link to www.portfoliovisualizer.com/ with data entry

As I expected, GLU underperforms both a 60/40 balanced fund and the S&P500 fund. And has a higher standard deviation. I see absolutely no attraction here.

Dividends are an illusion. Money is fungible. Total Return measures money. Dividends are just a subset of that. Look at the whole picture.

-ERD50

 

[damonhowatt]

Erd50: Thanks for the link to the Portfolio Visualizer. First time I've seen it. It does indeed show the better long term performance of the S&P index compared to individual stocks. I'm revising my plans re: stock dividends.

 

[bingybear]

This is a leveraged closed end fund in the utility sector. One would not evaluate these like a normal MF or portfolio of stocks.

DNP is another CEF in the utility sector that typically trades above NAV and uses more leverage.

Having some ROC is not unusual for CEFs. But if you buy after the initial funding and buy shares on the open market, your $ are not adding to the capital in the CEF. Your $ are just traded for the shares someone else is selling.

 

[alaska55]

This is a leveraged closed end fund in the utility sector. One would not evaluate these like a normal MF or portfolio of stocks.

DNP is another CEF in the utility sector that typically trades above NAV and uses more leverage.

Having some ROC is not unusual for CEFs. But if you buy after the initial funding and buy shares on the open market, your $ are not adding to the capital in the CEF. Your $ are just traded for the shares someone else is selling.

Dnp Is trading at a +18% premium, which means you are paying 18% over the underlying valve of its holdings. Don't think that's a good thing.

 

[bingybear]

I meant look at from comparison. My guess the OP does not understand that GLU is not an ETF or mutual fund.
Since inception (1987) DNP had a average premium of 14.12%, max preimium of 44.68% and minimum of -6.82%. It doesn't act like a normal ETF. You are paying for the underlying investment scheme and that its availability as new shares are not created. Thus there can be a scarcity. It is more important to know how the premium is compared to historical premiums (interest in the CEF) and ability of the CEF to produce its income stream.


I'm just learning about these. I would not consider them if all I wanted to own dividend generating stocks, ETFs, or MF.

If one is looking for an CEF (and all that goes with it), I'm not sure if DNP is all that bad. If you look at its historical premium it is about 4% above it's long term average. I would think that the statistical premium over a shorter time would be more relevant (several years). So my guess is that the 18% is not the right metric. Maybe the 4% over the long term average or better year a shorter term. But more analysis of what the CEF does is likely needed. I own a few shares (nothing significant) to see how it works.

edit:- I would not buy an CEF that is trading below NAV if its historical premium is also below NAV? Especially if it is near the top of its premium range.