DNP Select Income Fund Inc. Section 19(a) Notice

Rhea-AI Summary

DNP announces distribution amounts for January 2024, highlighting sources and percentages. The distribution per share of common stock is $0.065, with breakdowns from various sources like Net Investment Income, Long-Term Capital Gains, and Return of Capital. The average annual total return on NAV for the past 5 years is 5.34%, with an annualized current distribution rate of 9.81%. Cumulative total return on NAV for the fiscal year-to-date is 8.23%.

Insights

Financial Analyst

The distribution announcement from the Chicago-based entity provides insight into the allocation of payouts to shareholders, which is a critical aspect of shareholder value and investment attractiveness. The distribution amount of $0.065 per share for January 2024, with 18% derived from net investment income and 14% from net realized long-term capital gains, suggests a healthy diversity in income sources. However, a significant portion, 68%, is attributed to the return of capital, indicating that the distributions are not solely from income or capital gains but also from the paid-in capital.

An annualized current distribution rate of 9.81% relative to the net asset value (NAV) is quite substantial and could signal an attractive yield for income-focused investors. Yet, this figure exceeds the average annual total return on NAV for the past five years (5.34%), which could raise sustainability concerns. The cumulative fiscal YTD distributions as a percentage of NAV at 0.82% is a relevant metric for assessing the impact of distributions on the fund's asset base over the short term.

Tax Advisor

From a tax perspective, the composition of the distribution is noteworthy. The differentiation between net investment income, net realized short-term capital gains, long-term capital gains and return of capital each has distinct tax implications. Notably, long-term capital gains are typically taxed at a lower rate than short-term gains or ordinary income. The absence of short-term capital gains in the current distribution is favorable for tax efficiency.

However, the return of capital represents a significant 68% of the distribution, which is not immediately taxable. Instead, it reduces the shareholder's cost basis in the investment, potentially increasing the capital gains tax liability upon sale of the shares. Investors should be aware of these nuances as they affect after-tax returns and the timing of tax liabilities.

Market Research Analyst

Examining the distribution components in the context of market trends, the reliance on return of capital could suggest that the fund's underlying investments are not generating sufficient income or realized gains to cover the distributions. This could be indicative of a broader market trend where income-generating assets are underperforming or a specific strategy employed by the fund that prioritizes capital growth over income.

The high annualized distribution rate compared to the five-year average total return raises questions about the fund's ability to maintain such distributions without eroding its capital base. This is particularly important for long-term investors who are concerned with the preservation of capital in addition to income generation.

CHICAGO--(BUSINESS WIRE)--

Notification of Sources of Distribution Distribution Period	January 2024
Distribution Amount Per Share of Common Stock	$0.065

The following table sets forth the estimated amounts of the current distribution, payable February 12, 2024 to shareholders of record January 31, 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 U.S. generally accepted accounting principles, which may differ from federal income tax regulations.

Distribution Estimates	January 2024				Fiscal YTD
Sources	Per Share Amount		% of Current Distribution		Per Share Amount		% of Cumulative Distributions
Net Investment Income	$	0.012	18	%	$	0.051	26	%
Net Realized Short-Term Capital Gains		-	-			-	-
Net Realized Long-Term Capital Gains		0.009	14	%		0.052	27	%
Return of Capital (or Other Capital Source)		0.044	68	%		0.092	47	%
Total (per common share)	$	0.065	100	%	$	0.195	100	%
November 30, 2023
Average annual total return* on NAV for the 5 years							5.34	%
Annualized current distribution rate as a percentage of NAV							9.81	%
Cumulative total return on NAV for the fiscal YTD							8.23	%
Cumulative fiscal YTD distributions as a percentage of NAV							0.82	%

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/20240209787596/en/

Dianna P. Wengler or Donny C. Overton

Phone: (833) 604-3163

Source: DNP Select Income Fund Inc.

FAQ

What is the distribution amount per share of common stock for DNP in January 2024?

The distribution amount per share of common stock for DNP in January 2024 is $0.065.

What are the sources of the distribution for DNP?

The sources of the distribution for DNP include Net Investment Income, Net Realized Long-Term Capital Gains, and Return of Capital.

What is the average annual total return on NAV for DNP over the past 5 years?

The average annual total return on NAV for DNP over the past 5 years is 5.34%.

What is the annualized current distribution rate as a percentage of NAV for DNP?

The annualized current distribution rate as a percentage of NAV for DNP is 9.81%.

What is the cumulative total return on NAV for the fiscal year-to-date for DNP?

The cumulative total return on NAV for the fiscal year-to-date for DNP is 8.23%.