Guggenheim Taxable Municipal Bond & Investment Grade Debt Trust (GBAB) seeks to provide current income and long-term capital appreciation, observes Marty Fridson, dividend expert and editor of Forbes/Fridson Income Securities Investor.
GBAB’s strategy is to invest largely in a diversified portfolio of taxable municipal securities, referred to as Build America Bonds (BABs). However, the Trust may invest up to 20% of managed assets in other se- curities, including asset-backed securities (ABS) and senior loans.
Under normal market conditions, at least 80% of managed assets are invested in high grade securities. As of 06/30/22, the portfolio was dominated by BABs, Qualified School Construction Bonds (QSCBs), and Taxable Municipal Securities (58.25%).
The top five sectors in the portfolio were Schools (13.59%), Other (11.14%), Bank Loans (8.73%), Universities (8.53%), and Hospitals (8.43%).
GBAB’s top five holdings were BlackRock Taxable Municipal Bond Trust (5.05%), West Virginia School Building Authority (2.45%), New Jersey Turnpike Authority (2.44%), Westchester Medical Center (2.38%), and Dallas Texas Convention Center Hotel Development Corp. (2.25%).
Market price performance during 2021 and 2022 was challenged by increased market volatility, higher interest rates, and the threat of a recession. The YTD market price total return for the period ended 06/30/22 was -22.08%.
However, we believe performance in 2023 stands to improve sharply with increased market stability as the Fed remains intent on avoiding a full-fledged recession. GBAB is suitable for medium-risk portfolios. Distributions are largely taxed as ordinary income. Buy at $22.00 or lower for a 6.86% annualized yield.