There are two types of fund policies – those that distribute a flat payout amount and those that use a formula percentage of income. Our list includes both types of funds. Funds that distribute a percentage return include more than income generated by the fund and can also include a return of a portion of shareholder capital as a way to achieve the percentage formula. In the case of these funds, typical expressions of yield can be misleading.
Our website is the only place where you can view two yield numbers. The first yield number is what we call the income-only yield. This number refers only to the true income components that make up the yield and does not include any redistributed capital. The second yield number is the distribution yield – the total amount of all distributions made, regardless of their nature. This is the same yield number that appears in major news outlets such as newspaper listings and may include return of capital. In this way, you can quickly spot funds that may be using a return of capital in order to make their promissory distributions.
For more information on managed distribution policies, see the following White Paper from Gabelli Funds:
Pros and Cons of a Managed Distribution Policy