Anyone Want To Comment on GUT Gabelli Utility?

[marko]

After enjoying a few years of higher interest yields, I've become spoiled. With treasuries et. al. getting lower I've been poking around for different opportunities.

I came across GUT (Gabelli Utility Trust) posting 11% and thought about sending about 2% of the portfolio their way. Quick research looks like they're a bit shaky. I've also looked at PAXS from Pimco but they're relatively new to the market. I already own smallish stakes in PTY and PDI (11%) and have been happy with them so I could go in that direction but wanted to spread out the risk. Also have a heavier holding in Floating Bank Rate at TFAIX, currently paying 7.99%, but fear that too will erode.

I'm far from risk averse and I'm still interested in GUT but wondering if the Collective here might have further insights.

Comments?

 

[audreyh1]

I got out of my Gabelli funds because they paid out too much in distributions, but I think you have different criteria .

 

[marko]

I got out of my Gabelli funds because they paid out too much in distributions, but I think you have different criteria .

Yes. More is better in my world.

 

[audreyh1]

Payout ratio over 1000%? I don’t know much about dividend health, but how is that sustainable?

 

[aja8888]

How about something like this? Pays about 8.4% monthly and has a good long track record.

Fidelity Floating Rate High Income Fund
MUTF: FFRHX

It's pretty much the same as your T Rowe Price fund though.

 

[marko]

How about something like this? Pays about 8.4% monthly and has a good long track record.

Fidelity Floating Rate High Income Fund
MUTF: FFRHX

It's pretty much the same as your T Rowe Price fund though.

Yes, I'm getting 7.99% from tfaix but I wonder for how much longer. History shows that the recent yield is a new thing. As long as it keeps in the 6 or 7% range I'm happy so it might be a matter of how long mortgage rates stay high. Five years ago, those funds were paying 3 or 4%

 

[MarieIG]

I took a peek at GUT and it's expensive right now (although so is almost everything else). If I were to nibble, it would have to be on a big dip within an IRA.

 

[all4j]

Quick research looks like they're a bit shaky.

Might have more pertinent comments if you elaborated a bit more on what concerns you. Since some of your pimco funds are cefs, you seem ok with those risks, although it does seem they are more pronounced on gut. It might really depend on what is important to you. That said, a couple of comments....

I find it hard to get a handle on gut at this particular point. Their recent rights offering was close to the fed decision & impact on nav since then is clear. Interestingly, if you chart VPU (Vanguard Utility ETF) against GUT for the year, that time period accounts for most of the dramatic difference in performance. Since VPU can't pull same levers as cef, the monthly distribution will be mush less but total return much higher.

Hope that helps -- good luck with your search

 

[MarieIG]

Might have more pertinent comments if you elaborated a bit more on what concerns you. Since some of your pimco funds are cefs, you seem ok with those risks, although it does seem they are more pronounced on gut. It might really depend on what is important to you. That said, a couple of comments....

I find it hard to get a handle on gut at this particular point. Their recent rights offering was close to the fed decision & impact on nav since then is clear. Interestingly, if you chart VPU (Vanguard Utility ETF) against GUT for the year, that time period accounts for most of the dramatic difference in performance. Since VPU can't pull same levers as cef, the monthly distribution will be mush less but total return much higher.

Hope that helps -- good luck with your search

I had bought VPU, but it has gotten pricey so I've eased off adding to that for the time being. Of course, it never had GUT type yields.

 

[OldShooter]

Not exactly the question you asked, but IMO 2% of a portfolio is meaningless. If you're not at 5 or 10% you are not making a serious investment, you just have a hobby. Nothing wrong with hobbies but they are not investments.

 

[marko]

Might have more pertinent comments if you elaborated a bit more on what concerns you. Since some of your pimco funds are cefs, you seem ok with those risks, although it does seem they are more pronounced on gut. It might really depend on what is important to you.

I find it hard to get a handle on gut at this particular point.

Well, that's what I was asking. I couldn't get my arms around it but can't figure out why not, thinking that I was missing something.

 

[marko]

Not exactly the question you asked, but IMO 2% of a portfolio is meaningless. If you're not at 5 or 10% you are not making a serious investment, you just have a hobby. Nothing wrong with hobbies but they are not investments.

I agree. But I tend to make a small stake, wait a bit and then add to it slowly along the way, ending up to 20% in some instances ( not that I'd go that high here). I just dont want to start along a path that leads nowhere and waste my time, particularly in a case with higher than normal risk.

 

[all4j]

I just dont want to start along a path that leads nowhere and waste my time, particularly in a case with higher than normal risk.

Well yeah, I'd say it is higher than "normal" risk, but would expect that since it has higher than normal distribution...depending on what is viewed as normal. The leverage & expense ratio are high, but not spectacular for cefs. But the Premium is definitely high & chronic. The distribution consists largely of return of capital -- which is ok IF you plan on holding til death or TLH'ing. You get a steady income stream, but total return lags. There seems to be a lot of confidence in Gabelli, but if/when that evaporates it will be hard to exit as thinly as it trades.

I'd turn it around & instead of "why not?" I'd ask "why buy?". ymmv

 

[marko]

^^^^^ thanks.

 

[NgineER]

^^^^^ thanks.

I’d look for input from @Mulligan or check Innovative Income Investor to see if they have any thoughts on it.

Usually higher yield will garner a higher price or indicate a shaky business that can’t get buyers without outrageous yields.

 

[hotwired]

Not exactly the question you asked, but IMO 2% of a portfolio is meaningless. If you're not at 5 or 10% you are not making a serious investment, you just have a hobby. Nothing wrong with hobbies but they are not investments.

True but it's important to think about that rule in contacts. What if that 2% is part of a 15% application to cefs or high income pics in particular? My HSA is made up of about 40 REITs MLPs and bdcs, every one of them is probably less than .05% of my total portfolio but that's irrelevant because it's like an index fund. The HSA is 4 pct of total portfolio

 

[OldShooter]

Hey, it's your hobby. You get to do it any way that you like. For me, even thinking about 40 positions comprising 15% of our portfolio makes my head ache. In sharp contrast, over 80% of our equity tranche is in one mutual fund. It would be 100% if not for some other constraints that I have.