DNP Select Income Fund Inc. Section 19(a) Notice
- None.
- None.
The distribution announcement from the fund is a reflection of the fund's investment strategy and operational efficiency. The distribution is comprised of net investment income, net realized long-term capital gains and a return of capital. The allocation of 26% from net investment income suggests a steady stream of income, potentially from interest or dividends, which is a positive indicator for the fund's income-generating assets.
However, investors should note the 38% return of capital component. This could imply that a portion of the distribution is not from income or capital gains but from the principal amount invested. While this can offer immediate liquidity, it may not be sustainable in the long run as it could erode the fund's capital base.
The annualized current distribution rate of 10.23% compared to the average annual total return of 5.88% over five years raises questions about the sustainability of such high payouts. Investors might be concerned if the fund is reaching for yield at the expense of capital preservation.
From a tax perspective, the different components of the distribution have varied implications for shareholders. The net investment income and net realized long-term capital gains are typically subject to different tax rates. It's important for shareholders to understand that the return of capital is not taxed immediately; instead, it reduces the cost basis of the investment, potentially resulting in higher capital gains upon sale of the shares.
Given the discrepancies between GAAP accounting and federal income tax regulations, shareholders should consult with a tax professional to understand the specific tax treatment of these distributions and plan accordingly. The notice also highlights the importance of the separate 19(a) notice, which will provide necessary details for tax reporting purposes.
Looking at the distribution in the context of market performance, the cumulative total return on NAV for the fiscal year-to-date of 6.37% alongside cumulative fiscal YTD distributions of 3.41% as a percentage of NAV provides a snapshot of the fund's performance relative to the broader market. If the market has been volatile or bearish, these figures could be seen as robust.
However, it's essential to benchmark these returns against peer funds and the relevant market indices. If the fund's returns are lagging behind comparable investments, it may indicate underlying issues with the fund's management or investment strategy, potentially affecting investor confidence and the fund's attractiveness.
Distribution Period |
March 2024 |
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Distribution Amount Per Share of Common Stock |
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The following table sets forth the estimated amounts of the current distribution, payable April 10, 2024 to shareholders of record March 28, 2024, together with the cumulative distributions paid this fiscal year-to-date (YTD) from the following sources. The fiscal year is November 1, 2023 to October 31, 2024. All amounts are expressed per share of common stock based on
Distribution Estimates |
March 2024 |
Fiscal YTD |
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Sources |
Per Share Amount |
% of Current
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Per Share Amount |
% of Cumulative
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Net Investment Income |
$ |
0.017 |
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$ |
0.081 |
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Net Realized Short-Term Capital Gains |
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- |
- |
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- |
- |
Net Realized Long-Term Capital Gains |
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0.023 |
|
|
0.146 |
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Return of Capital (or Other Capital Source) |
|
0.025 |
|
|
0.098 |
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Total (per common share) |
$ |
0.065 |
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$ |
0.325 |
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February 29, 2024 |
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Average annual total return* on NAV for the 5 years |
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Annualized current distribution rate as a percentage of NAV |
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Cumulative total return on NAV for the fiscal YTD |
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Cumulative fiscal YTD distributions as a percentage of NAV |
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The Fund will issue a separate 19(a) notice at the time of each monthly distribution using the most current financial information available. You should not draw any conclusions about the Fund's investment performance from the amount of this distribution or from the terms of the Fund’s managed distribution plan.
The Fund estimates that it has distributed more than its income and capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income."
The amounts and sources of distributions reported in this notice are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of the fiscal year and may be subject to changes based on tax regulations. The Fund or your broker will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
* Simple arithmetic average of each of the past five annual returns.
DNP Select Income Fund Inc. (NYSE: DNP) is a closed-end diversified investment management company. The Fund’s primary investment objectives are current income and long-term growth of income. The Fund seeks to achieve these objectives by investing primarily in a diversified portfolio of equity and fixed income securities of companies in the public utilities industry. For more information, visit the Fund’s website at www.dpimc.com/dnp or call the Fund at (800) 864-0629.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240409154717/en/
Dianna P. Wengler or Donny C. Overton
Phone: (833) 604-3163
Source: DNP Select Income Fund Inc.
