GDV: Looking Like A Buy

Summary

• GDV is a "plain" equity fund that some investors may find interesting.
• The fund is at a significant discount, with its top holdings in the beaten down financial sector.
• I think the fund is at an interesting level to be picking up shares again.
• This idea was discussed in more depth with members of my private investing community, CEF/ETF Income Laboratory. Get started today »

Written by Nick Ackerman, co-produced by Stanford Chemist

Gabelli Dividend & Income Trust (NYSE:GDV) is a closed-end fund that has offered attractive returns over the longer term. However, on a YTD basis and over the last couple of years, the fund has really struggled. This has been on both a share price basis and a NAV basis. The underperformance relative to the SPDR S&P 500 (SPY) really started in 2018. This then continued in 2019 with SPY's total NAV return of a whopping 31.29%. GDV was able to have a total NAV return of 24.54%, which is typically quite respectable but comparatively speaking is rather disappointing.

A reason for this underperformance is the fund's tilt towards holding a higher allocation to the financial sector. I've covered several pieces lately talking about the financial space; one on BlackRock's Enhanced Equity Dividend Trust (BDJ) and another on John Hancock's Financial Opportunity Fund (BTO) - a fund with a primary focus on the financial space.

GDV also conducted a rights offering last year, in November. That saw the fund offer new shares that slightly diluted shareholders. In all, this didn't move the needle for the fund in a massive way since there was a floor put in place. In fact, the offering was oversubscribed and exceeded the amount available. I would say that it was quite a successful raising of capital for the managers.

In fact, we saw from when the fund announced its rights offering on September 23rd to the end of 2019 - the discount hadn't really ticked all that much wider before closing that gap again.

Since then, the fund's discount has begun to widen again back to slightly over 11% to the current 11.09%. I believe that this fund might be attractive to pick up at these current levels due to this

Analyst’s Disclosure:I am/we are long GDV. 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.

This article was originally published to members of the CEF/ETF Income Laboratory on May 27th, 2020.