Supreme Court Ruling Boosts Your Dividends Despite Wall Street’s Concerns

The U.S. Supreme Court ruled on June 11 that Saba Capital Management lacks the right to sue on matters related to closed-end funds (CEFs), siding with FS Credit and emphasizing that only the SEC can enforce the Investment Company Act. The 6-3 decision protects CEF bylaws that limit shareholder voting power above a 10% stake, ensuring that activist investors like Saba cannot influence fund operations to close discounts or force liquidations.

This ruling keeps discounts intact, benefiting dividend investors who rely on high-yield payouts from CEFs, which frequently trade at nominal valuations, averaging a 6% discount, or 94 cents on the dollar. By maintaining these defenses, the court’s decision means that CEF investors can continue to capitalize on discounted shares without the threat of forced liquidation by activist investors.