GOF offers a high dividend yield of 14.4%, but its NAV has been declining, raising concerns about long-term sustainability and premium valuation. The fund's strategy includes high exposure to below-investment-grade borrowers and option writing, which limits upside potential and increases risk in a high-interest-rate environment. Despite consistent dividends since inception, Guggenheim Strategic Opportunities Fund's earnings haven't fully supported distributions, relying heavily on return of capital, which may appeal to income-focused investors.
The Guggenheim Strategic Opportunities Fund has boasted impressive returns, beating out the S&P 500 since my first recommendation. GOF's premium has surged to 31.37%, making it expensive compared to its NAV, leading to a recommendation to rotate into cheaper funds. Moderate and conservative investors should consider selling GOF to capitalize on the high premium and invest in alternative CEFs trading at discounts.
The Guggenheim Strategic Opportunities Fund is a top-performing credit fund with an unsustainable distribution policy. The fund's 18% NAV distribution yield far exceeds its 8.9% long-term returns, depleting NAV and making the distribution policy unsustainable. With its premium to NAV once again over 30%, I believe investors should sell GOF to avoid a likely collapse of the premium in the coming quarters.
Guggenheim Strategic Opportunities Fund operates as a closed end fund that generates its earnings through a mixed portfolio of fixed income assets and equities. The large 13.8% dividend yield makes GOF appealing for income investors, but I question the sustainability of the distribution due to weak coverage. GOF has outperformed the S&P 500 with a 37% YTD return through a combination of price appreciation and high income.
Who is paying a 27% premium for Guggenheim Strategic Opportunity Fund (GOF)?
Guggenheim Strategic Opportunities Fund trades at a 23.86% premium to NAV, with a distribution rate of 16.2% and total leverage ratio of 22.6%. The fund has a history of trading at a premium and strong performance, outperforming high-yield and aggregate bond ETFs. The fund's portfolio includes various fixed-income instruments, bank loans, high-yield bonds, and preferred securities, but may face downside risk in riskier credit scenarios.
Closed End Funds That Offer A Discount To Reinvest
The Guggenheim Strategic Opportunities Fund has been performing well at market price so far this year, up 17%, but its NAV performance has been extremely underwhelming comparatively. As a result, GOF is now at the top of my list of CEFs that have seen their market price far outperform their NAV, which is a red flag near term. With GOF back to a 20%-plus premium and an NAV only up 1.5% year-to-date, GOF is extremely overpriced and will have a hard time covering its 18.0% NAV yield.
The Guggenheim Strategic Opportunities Fund has been praised for its double-digit dividends, but I am now limiting my stake in GOF and phasing it out of my CEF portfolio. GOF is a mixed bag of assets with a growing allocation to stocks, and it has performed well against its benchmark. Recent performance has been spurred on by a rise in premium, and the trade I recommended in November has come to a close.
The Guggenheim Strategic Opportunities Fund trades at a 10% premium over its net asset value and has a current distribution rate of 16.17%. The fund typically trades at a premium, but its premium has decreased recently, coinciding with a sizeable drawdown in fixed income. The fund's portfolio consists mostly of corporate exposures and has a healthy allocation to bank loans, but it is fading government exposure.