GAB's 11% Yield Comes With a Hidden Cost Retirees Should Know

"Gabelli Equity Trust operates under a formal managed distribution policy, committing to a minimum annual distribution equal to 10% of its average net asset value per share. This policy choice means the fund pays 10% of NAV regardless of whether its portfolio generates sufficient dividends and capital gains."

"The distribution rate is not representative of dividend yield or total return and has historically included a return of capital. While return of capital can indicate portfolio growth, it can also deplete the asset base if net asset value is eroding."

Gabelli Equity Trust, a closed-end fund, has maintained uninterrupted quarterly distributions since 1986, currently yielding about 11%. The fund's income comes from dividends, realized capital gains, and return of capital. It operates under a managed distribution policy, committing to a minimum annual distribution of 10% of its average net asset value, regardless of actual income generated. This policy can lead to distributions that include return of capital, which may deplete the asset base if net asset value declines. Understanding this dynamic is crucial for evaluating the sustainability of the yield.

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