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Healthcare 5-7% Yields, 11%-15% Discounts: Tekla Healthcare Opportunities, Gabelli Healthcare & Wellness Trust


  • THQ yields 7.41%, GRX yields 5.19%.
  • THQ is selling at a -10.95% discount to NAV.
  • GRX is selling at a -14.89% discount to NAV.
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Looking for attractive yields in the healthcare sector? Healthcare got a boost in the market this week after the Super Tuesday results made it appear that Joe Biden has a better chance of getting the nomination.

Given the aging demographics in the US, healthcare seems like a logical place to try and earn some income. The problem, though, is that, overall, the healthcare sector's overall dividend yield is skimpy, at ~1.79%, just above tech's anemic 1.41% yield.

Of course, there are a fair amount of higher yield vehicles within the healthcare sector, including some REITs, and a small number of closed-end funds.

One of the interesting things about CEFs is that you can often buy them at a discount to their net asset values.

Tekla Healthcare Opportunities Fund (NYSE:THQ) and Gabelli Healthcare & Wellness Trust (NYSE:GRX) are two CEFs which have a history of trading at discounts.

As of intraday 3/5/20, THQ was selling at a -10.95% discount, and GRX was selling at a deeper -14.89% discount. Both discounts were higher than their 1-, 3-, and -5-year average discounts to NAV:

The Z-scores show three-month discounts that are deeper than the six-month and one-year scores for both THQ and GRX:


THQ - The fund's objective is to seek current income and long-term capital appreciation through investing in companies engaged in the healthcare industry, including equity securities, debt securities and pooled investment vehicles.

GRX - The trust will invest at least 80% of its assets, plus borrowings made for investment purposes, in equity securities such as common stock and preferred stock and income-producing securities, such as fixed income debt securities and securities convertible into common stock, of domestic and foreign companies in the healthcare and wellness industries. The remaining 20% of its assets may be invested in other securities, including stocks, debt obligations and money market instruments, as well as certain

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This article was written by

Double Dividend Stocks profile picture
Robert Hauver, MBA, aka “Double Dividend Stocks” was VP of Finance for an industry-leading corporation for 18 years and has been investing for more than 30 years. He focuses on undercovered and undervalued income vehicles and he leads the investing group Hidden Dividend Stocks Plus he scours the world's markets to find solid income opportunities with dividend yields ranging from 5% to 10% or more, backed by strong earnings. Features include: a portfolio with up to 40 holdings at a time including links to associated articles, a dividend calendar, weekly research articles, exclusive ideas, and trade alerts.

Analyst’s Disclosure: I am/we are long GRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Our DoubleDividendStocks.com service has featured options selling for dividend stocks since 2009. It's a separate service from our Seeking Alpha Hidden Dividend Stocks Plus service. Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (23)

The discounts are widening b/c some folks are worried about CEF management companies themselves having issues. I am certainly keeping that in mind, just like ETFs are not immune to problems too. The whole system is under pressure and might burst. But I do like these discounts. Might pick up some HQH.
I don't think there is much to worry about. People are just being crazy. Healthcare stocks should be holding steady. I got mine a few years ago when the Democrats were telling jokes about socialized medicine. Neither party will do a thing about medical care. It's all insurance driven now. I only add healthcare during times like this and never reinvest dividends until rumors fly again. Like NOW. Simply no reason for this nonsense.
A polite contrarian view. Actually medicine is medicare driven now not insurance driven. We barely have any free market insurance left. Try to charge someone LESS than medicare pays (even if they do not qualify) and you could literally be fined or tossed into a cage.
I work in healthcare and the conversations we have, its just very very sad. I have to ask as a thought experiment what would happen we actually did have an insurance market, like in car insurance? Where its very easy to use and overall does a great job Heck I think I have around a million bucks total coverage in a high risk state (Colorado) and it costs me 100 smackers a month, not bad, right?

Long and averaging into GRX for a nice slow conservative well run fund at a discount with a not too high distribution rate that can be more easily maintained.
Bought THQ this am with a stink bid. Didn't think it would go so low as fast as it did. Got DOC and HTA with stink bids too. Didn't think they would fill for awhile but they did. Crazy market! No reason for health care stocks/REITs to go down like they did. THQ has a broad mix of healthcare stocks/REITS. The leverage and bonds complements my BME that just does options. Your article helped my final decision. The Gabelli fund was good too but just not enough assets under management and strange mix. I already have enough staple stocks. I appreciate this timely coverage of decent stocks.
THQ 's NAV has been pretty consistent & above inception NAV ,all while cranking out a 7-9% dividend ,that has not been destructive to NAV. Have added quite abit the last 10 days or so along with BME & GRX , all 3 being good funds , especially for the current times . THQ is usually more volatile normally , generally harder to get good discounted buyin on other 2 funds . Current prices on all 3 & most everything else are exceptional ,investors with the fortitude to act will be well rewarded , this only happens, maybe a small window in 5 or so years , have been buying dozens of funds at 5+ yr lows, are good times to be buying these specific healthcare/wellness funds BME ,THQ & admitably somewhat oddball GRX whose consumer defensive component will also benefit by the crazy heightened demands currently ,yet trading at all time lows

Plus GRX will soon redeem its 5.76% series A preferred shares

I added to GRX too but got filled at 8.91 on the gap down open with a GTC order since I had to be away. That was actually adding up to my old position since I have held them so long.
MAYHAWK profile picture
You might want to point out that ROC is not necessarily bad. If it is non-destructive, meaning no NAV erosion, then it is merely an accounting fiction. Only ROC that reduces NAV is of concern. THQ's ROC is of the non-destructive type and therefore nothing to fear.
Thanks for article.
Might want to fix typo in text to match table:
Healthcare Equipment/Supplies, at 5.6% -->14.3%
team Gabe profile picture
great article !
I'm sticking with BME.
snaimpally profile picture
Thanks for the article. You should check out HQH and HQL. Both are closed-end Tekla funds that yield 9%+ and trade at a discount to NAV.
Double Dividend Stocks profile picture
Stay tuned for future coverage.
I hold a few shares of GRX and might do some bottom fishing for a few more around $10.00 and lower. They are flogging the corona hysteria for all they can get out of it to hurt the President's chances in November. As sick as it is we have to use it to our investing advantage.
snaimpally profile picture
@CaptTurbo The president, in May 2018, disbanded a global health security team led by Rear Adm. Timothy Ziemer. The team was responsible for coordinating a response to a pandemic. No replacement team was appointed.
Double Dividend Stocks profile picture
Thanks for reading and commenting.
Double Dividend Stocks profile picture
It's at $20.42 today.
Thanks for reading.
GRX is an odd duck with the consumer staples in it. Not bad for defense, but soy sauce and health care are an odd mix. Mario is a good picker along with his crew but no real experience in medical care. Thought about it but just too odd.

I held THQ for a bit and sold at a profit. I really like the mixture of stocks and even a few REITs. Top notch management team with the CEO having a PhD in biological sciences, other med pros and business people. They run HQH which had a good past. These folks know the business! I sold due to the leverage, which probably isn't the best in a recession. I think it's probably the best diversification model for a healthcare CEF with leverage.

I also bought BME long and picked MPW at the same time. Bernie and Warren were telling jokes about reforming the health care system. Democrat Keystones Kop humor better than Obama's socialized medicine quips that only increased insurance companies chokehold on medicine. Trump had a fantastic idea to disclose actual medical care costs so competition could arise in a free market. That idea was killed quick! Result? BME and MPW bought cheap.
I am up quite a bit due to the health care scare which pays part of my Medicare! Great coverage of both CEFs. When THQ goes down I will buy it again.
gman1253 profile picture
Yep - comparison should have included BME as well.
Double Dividend Stocks profile picture
Stay tuned for future coverage.
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