Gabelli Equity Trust 10% Distribution Policy Reaffirmed and Declared Second Quarter Distribution of $0.15 Per Share

Rhea-AI Summary

The Gabelli Equity Trust (NYSE:GAB) has reaffirmed its 10% distribution policy and declared a quarterly cash distribution of $0.15 per share, payable on June 23, 2025, to shareholders of record on June 13, 2025. The distribution's preliminary composition for 2025 includes approximately 2% from net investment income, 21% from net capital gains, and 77% as return of capital. The Fund maintains a minimum annual distribution of 10% of average NAV or sufficient amounts to meet IRS requirements. The distribution is subject to federal income tax rates of up to 20% for long-term capital gains and qualified dividend income, plus a 3.8% Medicare surcharge for certain shareholders.

Positive

• Maintained consistent 10% distribution policy
• 21% of distribution comes from net capital gains
• Regular quarterly distribution provides steady income stream to shareholders

Negative

• 77% of distribution classified as return of capital, indicating insufficient earnings to cover distributions
• Only 2% of distribution comes from net investment income
• Distribution policy subject to modification with no guarantee of continuation

Insights

Financial Analyst

Gabelli Equity Trust reaffirms 10% distribution policy with $0.15 quarterly dividend, notably comprised of 77% return of capital.

The Gabelli Equity Trust's declaration of a $0.15 per share distribution maintains its 10% distribution policy based on average NAV. This quarterly payment, scheduled for June 23, 2025, represents the Fund's commitment to distributing a minimum of 10% of average net asset value annually.

What's particularly noteworthy is the composition of this distribution. Based on current accounting records, approximately 77% of 2025 distributions are classified as return of capital, with only 21% from net capital gains and a mere 2% from net investment income. This substantial return of capital component essentially means shareholders are receiving their own investment back rather than actual earnings generated by the fund.

This distribution structure signals potential underlying performance concerns. The high return of capital percentage indicates the fund isn't generating sufficient earnings to cover its distributions naturally. While this maintains the appearance of a consistent yield that might attract income-focused investors, it's effectively depleting the capital base over time.

For investors, this has important tax implications. Return of capital isn't immediately taxable but reduces cost basis, potentially creating larger capital gains liability upon eventual sale. The relatively small portions coming from actual investment income (2%) and capital gains (21%) highlight that the fund's portfolio isn't generating substantial organic returns to support its distribution policy.

The Board's commitment to continue monitoring the distribution level against NAV and market conditions suggests they recognize the sustainability challenges of the current approach. Long-term investors should carefully evaluate whether this high return of capital distribution model aligns with their investment objectives or merely masks underlying performance issues.

RYE, N.Y., May 14, 2025 (GLOBE NEWSWIRE) -- The Board of Directors of The Gabelli Equity Trust Inc. (NYSE:GAB) (the “Fund”) reaffirmed and satisfied its 10% distribution policy by declaring a $0.15 per share cash distribution payable on June 23, 2025 to common stock shareholders of record on June 13, 2025.

The Fund intends to pay a minimum annual distribution of 10% of the average net asset value of the Fund within a calendar year or an amount sufficient to satisfy the minimum distribution requirements of the Internal Revenue Code for regulated investment companies. The average net asset value of the Fund is based on the average net asset values as of the last day of the four preceding calendar quarters during the year. The net asset value per share fluctuates daily.

Each quarter, the Board of Directors reviews the amount of any potential distribution from the income, realized capital gain, or capital available. The Board of Directors will continue to monitor the Fund’s distribution level, taking into consideration the Fund’s net asset value and the current financial market environment. The Fund’s distribution policy is subject to modification by the Board of Directors at any time, and there can be no guarantee that the policy will continue. The distribution rate should not be considered the dividend yield or total return on an investment in the Fund.

All or part of the distribution may be treated as long-term capital gain or qualified dividend income (or a combination of both) for individuals, each subject to the maximum federal income tax rate for long term capital gains, which is currently 20% in taxable accounts for individuals (or less depending on an individual’s tax bracket). In addition, certain U.S. shareholders who are individuals, estates or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surcharge on their "net investment income", which includes dividends received from the Fund and capital gains from the sale or other disposition of shares of the Fund.

If the Fund does not generate sufficient earnings (dividends and interest income, less expenses, and realized net capital gain) equal to or in excess of the aggregate distributions paid by the Fund in a given year, then the amount distributed in excess of the Fund’s earnings would be deemed a return of capital. Since this would be considered a return of a portion of a shareholder’s original investment, it is generally not taxable and would be treated as a reduction in the shareholder’s cost basis.

Long-term capital gains, qualified dividend income, investment company taxable income, and return of capital, if any, will be allocated on a pro-rata basis to all distributions to common shareholders for the year. Based on the accounting records of the Fund currently available, each of the distributions paid to common shareholders in 2025 would include approximately 2% from net investment income, 21% from net capital gains and 77% would be deemed a return of capital on a book basis. This does not represent information for tax reporting purposes. The estimated components of each distribution are updated and provided to shareholders of record in a notice accompanying the distribution and are available on our website (www.gabelli.com). The final determination of the sources of all distributions in 2025 will be made after year end and can vary from the quarterly estimates. Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of the current distribution. All individual shareholders with taxable accounts will receive written notification regarding the components and tax treatment for all 2025 distributions in early 2026 via Form 1099-DIV.

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. For more information regarding the Fund’s distribution policy and other information about the Fund, call:

Molly Marion
(914) 921-5681

About The Gabelli Equity Trust
The Gabelli Equity Trust Inc. is a diversified, closed-end management investment company with $2.0 billion in total net assets whose primary investment objective is long-term growth of capital. The Fund is managed by Gabelli Funds, LLC, a subsidiary of GAMCO Investors, Inc. (OTCQX: GAMI).

NYSE – GAB
CUSIP – 362397101

THE GABELLI EQUITY TRUST INC
    Investor Relations Contact:
    Molly Marion
    (914) 921-5681
    mmarion@gabelli.com

FAQ

What is GAB's quarterly distribution amount for Q2 2025?

Gabelli Equity Trust (GAB) declared a quarterly cash distribution of $0.15 per share for Q2 2025.

When is GAB's Q2 2025 distribution payable?

The distribution is payable on June 23, 2025, to shareholders of record as of June 13, 2025.

What is the composition of GAB's 2025 distributions?

Based on current accounting records, GAB's 2025 distributions consist of approximately 2% from net investment income, 21% from net capital gains, and 77% as return of capital.

What is Gabelli Equity Trust's distribution policy?

GAB maintains a 10% distribution policy, paying a minimum annual distribution of 10% of the average net asset value or an amount sufficient to satisfy IRS requirements for regulated investment companies.

How are GAB's distributions taxed?

GAB's distributions may be taxed as long-term capital gains or qualified dividend income at a maximum federal rate of 20%, plus a 3.8% Medicare surcharge for eligible shareholders. Return of capital portions are generally not taxable.