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Gabelli Equity Trust 10% Distribution Policy Reaffirmed And Declared First Quarter Distribution Of $0.15 Per Share

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The Gabelli Equity Trust Inc. (GAB) reaffirmed its 10% distribution policy by declaring a $0.15 per share cash distribution, payable on March 21, 2024. The Fund aims to pay a minimum annual distribution of 10% of the average net asset value or as required by the IRS. Shareholders should be aware of tax implications and the possibility of returns of capital.
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The reaffirmation of The Gabelli Equity Trust's distribution policy represents a commitment to providing shareholders with a predictable income stream, which can be a decisive factor for income-focused investors. The 10% distribution policy, while attractive, must be scrutinized in the context of the Fund's ability to generate sufficient earnings to sustain such distributions. A distribution that exceeds earnings could imply a return of capital, affecting the Fund's net asset value (NAV) over time.

An important aspect to consider is the impact of market volatility on NAV, as it fluctuates daily. The Board's quarterly review of potential distributions suggests a proactive approach to managing payout levels in relation to the Fund's performance and market conditions. However, investors should be aware of the tax implications, as distributions may be classified as long-term capital gains, qualified dividend income, or return of capital, each with different tax treatments.

From a taxation perspective, the distinction between dividend income and return of capital is significant. The Fund's note that distributions may be treated as a return of capital indicates a potential non-taxable event, effectively reducing an investor's cost basis in the Fund. This can defer tax liability but may increase capital gains tax upon the sale of shares. The mention of a 3.8% Medicare surcharge on 'net investment income' for certain shareholders highlights the need for investors to consider their individual tax situations when evaluating the attractiveness of such distributions.

Furthermore, the Fund's distribution policy's potential modification serves as a reminder of the uncertainty inherent in investment income. It underscores the importance for shareholders to stay informed about the sources of distributions and the Fund's financial health, as changes in policy could directly affect their investment returns and tax obligations.

For the broader market, the Fund's distribution policy could be indicative of management's confidence in their investment strategy and the underlying assets. A stable or increasing distribution often signals a healthy portfolio and effective asset management. However, if the distributions are sustained by capital rather than earnings, it could signal underlying issues with the Fund's investment strategy or asset performance. The Fund's performance relative to its peers and the market will be an important indicator of its long-term sustainability and appeal to investors.

Additionally, the Fund's distributions are based on the average NAV over the previous four quarters, which smooths out short-term volatility but may not fully account for longer-term market trends. Investors and analysts should monitor the Fund's NAV in relation to market movements to gauge the sustainability of the current distribution policy.

RYE, N.Y., Feb. 14, 2024 (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 March 21, 2024 to common stock shareholders of record on March 14, 2024.

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, the current distribution paid to common shareholders in 2024 would be deemed 100% from paid-in 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 2024 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 2024 distributions in early 2025 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 $1.9 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).

Investor Relations Contact:
Molly Marion
(914) 921-5681
mmarion@gabelli.com

NYSE – GAB
CUSIP – 362397101



FAQ

What is the cash distribution declared by The Gabelli Equity Trust Inc. (GAB)?

The Fund declared a $0.15 per share cash distribution.

When is the cash distribution payable?

The cash distribution is payable on March 21, 2024.

What is the minimum annual distribution percentage set by the Fund?

The Fund aims to pay a minimum annual distribution of 10% of the average net asset value.

What are the tax implications for shareholders?

Shareholders may be subject to different tax rates based on the type of income received.

How are the distribution sources determined?

The final determination of distribution sources for a year is made after year-end and can vary from quarterly estimates.

Where can shareholders find information on distribution components?

Shareholders can find updated distribution components on the company's website.

The Gabelli Equity Trust Inc.

NYSE:GAB

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