Gabelli Utility Trust Continues Monthly Distributions, Declares Distributions of $0.05 Per Share

Rhea-AI Summary

The Gabelli Utility Trust (NYSE:GUT) has announced the continuation of its fixed monthly cash distribution policy, declaring distributions of $0.05 per share for April, May, and June 2025. The Fund's Board of Trustees reviews distribution amounts quarterly, considering income, realized capital gains, and market conditions.

The distributions are scheduled for payment on April 23, May 22, and June 23, 2025, to shareholders of record on April 15, May 15, and June 13, respectively. The Fund has maintained monthly distributions since October 1999. Currently, shares are trading at a premium to net asset value, which the Board believes may not be sustainable.

The 2025 distributions are expected to comprise approximately 1% from net investment income and 99% return of capital on a book basis. Shareholders should note that reinvestment of distributions occurs at a premium to net asset value under the current market price.

Positive

• Consistent monthly distribution policy maintained since October 1999
• Fixed monthly cash distribution of $0.05 per share confirmed for next quarter

Negative

• Shares trading at potentially unsustainable premium to net asset value
• 99% of distributions classified as return of capital, indicating insufficient earnings to cover distributions
• Only 1% of distributions derived from net investment income

Insights

Investment Income Analyst

The Gabelli Utility Trust's latest distribution announcement reveals several critical aspects that warrant careful investor attention. The $0.05 monthly distribution continuation masks a concerning underlying structure: 99% of distributions represent return of capital, with only 1% coming from net investment income.

This distribution composition is particularly noteworthy for several reasons. Return of capital distributions effectively return investors' original investment, reducing their cost basis rather than representing actual investment gains or income. While this can offer tax advantages by deferring taxation, it may indicate the fund's inability to generate sufficient income or capital gains to support its distribution policy through genuine investment returns.

The Board's unusual explicit warning about the fund's premium to NAV being "not likely to be sustainable" is a significant red flag. Trading at a premium means investors are paying more than the underlying assets are worth, creating additional risk of capital loss when this premium eventually contracts. This warning from the Board itself suggests they recognize potential market inefficiency in the fund's current pricing.

The distribution's tax treatment breakdown - with its heavy reliance on return of capital - raises questions about long-term sustainability. While the fund has maintained monthly distributions since 1999, the current structure essentially returns investors' capital rather than generating new value. This approach can mask the fund's actual performance and potentially lead to NAV erosion over time if investment returns don't match distribution rates.

For investors in taxable accounts, the 3.8% Medicare surcharge consideration and the tax treatment of distributions (particularly the return of capital component) require careful planning. While return of capital distributions aren't immediately taxable, they reduce the cost basis, potentially leading to larger capital gains taxes when shares are eventually sold.

RYE, N.Y., Feb. 13, 2025 (GLOBE NEWSWIRE) -- The Board of Trustees of The Gabelli Utility Trust (NYSE:GUT) (the “Fund”) approved the continuation of its policy of paying fixed monthly cash distributions. The Board of Trustees declared cash distributions of $0.05 per share for each of April, May, and June 2025.

Distribution Month	Record Date	Payable Date	Distribution Per Share
April	April 15, 2025	April 23, 2025	$0.05
May	May 15, 2025	May 22, 2025	$0.05
June	June 13, 2025	June 23, 2025	$0.05

Each quarter, the Board of Trustees reviews the amount of any potential distribution from the income, realized capital gain, or capital available. The Board of Trustees will continue to monitor the Fund’s distribution level, taking into consideration the Fund’s net asset value and the financial market environment. If necessary, the Fund will pay an adjusting distribution in December which includes any additional income and net realized capital gains in excess of the monthly distributions for that year to satisfy the minimum distribution requirements of the Internal Revenue Code for regulated investment companies. The Fund’s distribution policy is subject to modification by the Board of Trustees 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. The Gabelli Utility Trust has paid a distribution to shareholders every month since October 1999.

The Fund’s shares are currently trading at a premium to net asset value. The Board of Trustees believes that the premium at which the Fund shares trade relative to net asset value is not likely to be sustainable. Shareholders participating in the Fund’s dividend reinvestment plan should note that at the current market price, the reinvestment of distributions occurs at a premium to net asset value.

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 1% from net investment income and 99% 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 monthly 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:

David Schachter
(914) 921-5057

About The Gabelli Utility Trust
The Gabelli Utility Trust is a diversified, closed-end management investment company with $327 million in total net assets whose primary investment objective is to seek long-term growth of capital and income by investing primarily in utility companies involved in the generation and distribution of electricity, gas, and water. The Fund is managed by Gabelli Funds, LLC, a subsidiary of GAMCO Investors, Inc. (OTCQX: GAMI).

NYSE – GUT
CUSIP – 36240A101

THE GABELLI UTILITY TRUST

Investor Relations Contact:
David Schachter
(914} 921-5057
dschachter@gabelli.com

FAQ

What is the monthly distribution amount for GUT stock in Q2 2025?

The Gabelli Utility Trust (GUT) declared monthly cash distributions of $0.05 per share for April, May, and June 2025.

What are the payment dates for GUT's Q2 2025 distributions?

The payment dates are April 23, 2025, May 22, 2025, and June 23, 2025, for their respective months.

How is GUT's 2025 distribution composed in terms of income sources?

The 2025 distributions are expected to comprise approximately 1% from net investment income and 99% would be deemed a return of capital on a book basis.

Is GUT stock currently trading at a premium or discount to NAV?

GUT stock is currently trading at a premium to its net asset value, which the Board of Trustees believes may not be sustainable.

How long has GUT maintained its monthly distribution policy?

The Gabelli Utility Trust has paid monthly distributions to shareholders consistently since October 1999.