GOF: 12% Dividend Yield, Outperforming Monthly Payer (NYSE:GOF)

Looking for some diversification in your portfolio? The Guggenheim Strategic Opportunity Fund (NYSE:GOF), a closed-end fund, or CEF, which offers a mix of fixed income and equity strategies. We began covering GOF at the start of 2022. So far in 2022, GOF has outperformed these 2 other bond funds, and the S&P 500, by a wide margin.

Looking back over the past year, GOF has lagged the S&P quite a bit on a price basis, while its ~12% dividend yield brings its total return to -5.26%, still lagging the S&P’s -1.06%, but better than the -9.3% for these 2 other bond funds:

Profile:

“The Fund’s investment objective is to maximize total return through a combination of current income and capital appreciation. The Fund will pursue a relative value-based investment philosophy, which utilizes quantitative and qualitative analysis to seek to identify securities or spreads between securities that deviate from their perceived fair value and/or historical norms.

The Fund’s sub-adviser seeks to combine a credit managed fixed-income portfolio with access to a diversified pool of alternative investments and equity strategies.” (GOF site)

GOF has $1.95B in managed assets, with 82% of its holdings U.S.-based. Management uses 23.5% leverage, (down from 30% earlier in 2022), and the Expense Ratio is 1.83%. Average daily volume is 450K, with 97.65M shares outstanding. The Assets/Debt ratio is 4.53X:

Holdings:

High Yield corporate bonds and Bank Loans are the 2 heaviest concentrations, at 34.3% and 32.3% respectively, followed by Cash and Equivalents at 24.4%, Asset Backed Securities, ABS, at 13.6%, investment grade Corporate Bonds, at 9.3%, and Preferred securities, at 5%.

Overall, Fixed Income formed 80%, of GOF’s portfolio as of 4/30/22, with Equity strategies down to less than 1%, vs. over 13% as of 1/31/22.

GOF’s top 10 holdings were mostly in corporate bonds, and only comprised ~7% of its holdings, as of 4/30/22:

Management has decreased the weighted average duration to 3.34, as of 4/30/22, vs. 4.59 on 1/31/22.

Credit quality has moved more into sub-investment grade, with investment grade, (AAA – BBB), at 26.11% as of 4/30/22, vs. ~48% as of 1/31/22 , while ~67% of the investments are till rated non-investment grade, (BB and lower):

NAV Pricing:

At its 6/9/22 closing price of $17.67, GOF was selling at a premium to its 6/8/22 NAV/share of $14.27, which is higher than its 1-, 3-, and 5-year premiums of ~20.3%, 14.7%, and 12.2%, respectively.

Distributions:

At $17.67, GOF yields 12.37%, and goes ex-dividend on 6/14/22, with a 6/30/22 pay date. Management has kept the monthly distribution at $.1821 since Q2 2013.

Parting Thoughts:

While GOF has outperformed so far in 2022, you may want to wait for a lower premium. Buying CEFs at lower than historical premiums or deeper than historical discounts can be a useful strategy.

If you’re interested in other high yield vehicles, we cover them every weekend in our articles.

All tables by Hidden Dividend Stocks Plus, except where otherwise noted.