High yield hedge: Gabelli Global Gold (GGN)
"It's time to buy Gabelli Global Gold, Natural Resources & Income Trust (NYSE: GGN) a closed-end management investment company that seeks to provide a high level of current income," says Bryan Perry.
The growth and income expert -- and editor of industry-leading The 25% Cash Machine -- highlights the high-yielding play on gold and natural resources.
"Back in December we sold our position in GGN for a 45% gain in two months. But at that time, I promised to jump back on board after a sharp pullback, since gold is going to be a good inflation hedge this year and could hit $1,000 per troy ounce. Well, now it is time to buy back into GGN.
"GGN invests primarily in equity securities of gold and natural resources companies and intends to earn income primarily through a strategy of writing (selling) covered call options on equity securities in its portfolio.
"It invests its assets in companies involved with the: gold and the natural resources industries; exploration, mining, fabrication, processing, distribution or trading of gold; and the exploration, production or distribution of natural resources, forestry products, metals and minerals.
"Plus, GGN invests in companies dealing with transportation companies and equipment manufacturers. Because of this diversification in asset investment, GGN has the liberty and flexibility to overweight in certain sub-sectors of the commodity markets as they see fit.
"And the way commodities have corrected this past year—some as much as 80%—it only makes sense to initiate a position while precious metals and raw commodities are trading at or near their yearly lows.
"GGN currently pays a distribution of 14 cents per share each month. In addition, GGN will adjust its distribution every December to include any additional income and capital gains in excess of the monthly distributions for the year.
"The high level of market volatility makes the selling of covered calls more lucrative because call premiums are priced so much higher than when in a stable market. For the managers at GGN, it’s so far so good.
"On November 20, GGN announced its monthly distribution policy for the next three months, instilling confidence in investors that it can maintain its dividend policy during these rough times.
"This is about as good visibility as one can ask for, and it shows the level of confidence that management has in declaring a dividend payout that translates into a whopping 13.35% yield.
"It's next dividend payment, March 2009, will be payable on March 24, 2009 to common shareholders as of March 17, 2009. Lock in that juicy 13%+ yield, and know that you have in place a solid inflation hedge that pays like a champ."
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