Gabelli Dividend & Income Preferred Filing

Although most everyone with interest in this new issue has most of the data the filing did finally hit the SEC this afternoon.

The final prospectus can be found here.

I have reviewed the document and as suspected there does not appear to be anything unusual or different in the papers.

eTrade showed the issue trading in the OTC Grey market, under ticker GDVVP, at a range of $24.95-$25.18 before closing at $25.12.

We have not picked up any yet but will likely do so tomorrow morning.

20 thoughts on “Gabelli Dividend & Income Preferred Filing”

  1. So what is the benefit of a strong Investment grade offering?

    Clearly, you lower the risk of default and losing money.

    You must also do better if you have a market correction or pull back. At least that’s what I was thinking last year. Then the 4th quarter happened and it proved me 100% wrong. GDV/PRG is a great example. It dropped down to the high $25 a share to $22.61. It fared no better than any other lower yield. So did my investment grade portfolio protect me in the market rate tantrum? It did not. It also did nothing to make my stress less,

    Since I see very little opportunity for capital gains in the new Gabelli offering, I will pass.

    1. Just one other side note. I will not question GDV high credit ratings on their preferred offerings. I have long believed that I do not have the ability to do a better job than a top-notch credit rating agency.

      With that said, Gabelli needs the proceeds of this offering for some purpose. I suspect that part of that is to be financially prudent for which they should be commended. Right now, about 23% of GDV monthly dividend on the CEF is being paid by returning capital to the shareholders. Apparently, this is fairly common by CEF’s. With that said, that practice by all CEF’s does NOT excite me.

      1. SteveA, you make some good points. According to the prospectus, they intend to call part of the E series.

        “The Fund estimates the total net proceeds of the offering to be $48,200,000, based on the public offering price of $25.00 per Series H Preferred Share and after deduction of the underwriting discounts and commissions and estimated offering expenses payable by the Fund.
        The Fund intends to use net proceeds from this offering to redeem a portion of the Fund’s outstanding Series E Auction Rate Preferred Shares. The Fund intends to call a portion of the Series E Auction Rate Preferred Shares for redemption within three months of the completion of this offering. Distributions on the Series B Auction Market Preferred Shares, Series C Auction Market Preferred Shares and Series E Auction Rate Preferred Shares accumulate at a variable rate set at a weekly auction. As of May 28, 2019, May 30, 2019 and May 29, 2019, the distribution rates on the Series B Auction Market Preferred Shares, Series C Auction Market Preferred Shares and Series E Auction Rate Preferred Shares, respectively, were 3.891%, 3.898% and 5.968%, respectively. Pending such redemptions, the proceeds of the offering of the Series H Preferred Shares will be held in high quality short term debt securities and similar instruments. ”

        Like you, I haven’t been interested by any CEF. Perhaps this is a “safer” play, or perhaps it’s a wash at the end of the day.

    2. Hi Steve-

      The 10 year got to 3.2 in Q4 of last year so it had putting the squeeze on the all the low yielders before the December correction hit.

      I think that had made them quite a bit more vulnerable than they should have been

    3. SteveA, I buy these issues because of the protections of the 1940 Act that they are required to obey. If there’s ever any trouble in the underlying CEF, you will be made whole. There is absolutely no stress in owning these, and the temporary down in the market at the end of last year was a screaming opportunity to buy more at an even higher effective yield.

      So your comment is a bit baffling to me.

    4. Maybe a useful comment on the above: IG is NOT to AVOID a markdown in price since a price marking is just the last buy/sell. Irrational or panic selling creates a marking of price; lower OR HIGHER (bubbling) and is just the last indication.
      IG rating means to be understand and enlist in a company’s financial structure and ability to persevere during a downturn of tougher economic times (read: hopefully), continue to pay-out income and eventually get respect through pricing confidence of their strong position which can be indicated by mark-ups in price later.
      There is price “insurance” that can be bought if you can understand and afford it.
      Americans are conditioned by media to be price focused instead of quality focused; that creates markdown “deals” for buyers who want to average up in quality and buy in at better prices. Look what had happened if you held all your IG positions from Sept 2018 until now, collected the income and just now looked at what had happened!?
      As a last comment: Climbing up the Balance Sheet hierarchy and oftentimes holding to maturity are valid “grading” tools too.
      These are general comments. I hope you have a firm understanding of these principles so you don’t feel compelled to murmurate with the flock. Best of Good-est Luck…and Skill! J

    5. This confused me too when I first started but you have to understand there are different types of risk. Investment grade issues will have lower coupons, which means they will do worse when interest rates are rising. But if the economy were to be bad then they would hold up better than the higher yield ones would. The risk the investment grade protects you from is just not being able to pay the dividend. Interest rate risk is a whole ‘nother animal.

      My conclusion is that you either need to have a mix, or be really good at telling what sort of economy you are going to be in. The latter is probably not possible on a consistent basis.

  2. Tim, I would be curious to know why you plan to buy this when, as some of us were writing in another post, the Allianz’s are available at a higher yield.

    This site goes all atwitter over every new issue that comes out. Back in the days when getting a new issue on the grey market below par was a sure thing, that made sense. But nowadays, it seems like there are more people chasing fewer new issues, and they never trade below par during the grey market period. And meanwhile, better yields may be available on established issues of similar quality.

    So what’s your motivation on this one? Thanks.

    1. Agree that on a day to day comparison, NCV-A is a better deal today. However; when you look at the trading history, GDV-G (5.2%) has held a better “premium” than NCV-A. I would be happy to get in under 25.15 – imho.

    2. Larry- I think you make a great point that maybe I need to be a little more diligent and not be so fixated on new issues. The Allianz issue has the added benefit of walking into the first ex-dividend on 6/12 if a person purchases today. 6/7.

      1. I do not since more information on NCV’s dividend breakdown. After going to market last year, you would hope that the entire dividend is from investments. If they are returning capital as part of the dividend stream, it would be good information to know. I do not find these folks as transparent as GDV. You may want to call them to find that out. Just my 2 cents. I am not interested in buying NCV

        1. Why would you think they are returning capital? The underlying CEF pays no return if capital in the distribution.

          1. where do you find that NCV was not returning capital on their dividends payout? Why would I think that? Many CEF’s do that.

            Take GDV for example. This comes from the business wire from the firm.

            “Based on the accounting records of the Fund currently available, each of the distributions paid to common shareholders in 2019 would include approximately 24% from net investment income, 53% from net capital gains and 23% would be deemed a return of capital on a book basis”

            I have no idea whether NCV is. I am just saying if they raised funds last year, you would hope it is 0.

          2. I really like the results from HTD over the last 10 years. CEF from John Hancock. Pays 0.138 per month. However, 72% of that is a return on capital.

            This doesn’t effect preferred stockholders but in my simple view of the world, you either need to cut dividends or raise funds. I may be way off base here, just one man’s opinion.

  3. Added GDVVP today after someone here mentioned it was trading on Fidelity.

    Thanks again Tim, for making this forum for preferred investors possible.

  4. TD required us to call in buy orders which was a little inconvenient this afternoon. They stated that it would be up on the institutional platform tomorrow. Don’t know about retail.

    1. I was able to place and order online with TD yesterday through the “Think or Swim” app. It didn’t execute however because it was at par.

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