The Problem With Gold and Precious Metals Investments is That They Don’t Pay You to Hold Them

There is a way to hold gold and precious metals related investments and get paid while you wait. I have been buying a closed end ETF on the TSX that trades with the symbol MMP.UN. It normally trades at a 15% premium to NAV (Net Asset Value) but in April they issued a warrant offering which has caused its units to drop significantly. These warrants expire on July 23, 2010. The fund last traded (May 7, 2010) at $7.78 per unit but has a fully diluted Net Asset Value of $8.09 at the close of trading on May 7, 2010. The manager pays a $1.20 per year cash distribution ($0.10 per month) resulting in a yield of 15.4%. The yield is expected to be paid from realized capital gains on its holdings.

As long as precious metals and mining stocks are in a secular bull market this funds payouts are sustainable. However, it is very volatile.

As an update…….The Units as of Sptember 10, 2010 are trading over $9 and are above the NAV as we predicted.

Please conduct your own due diligence.

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