Author Archive: Michael Foster

Today I want to talk about something we don’t touch on very often in these columns: an obscure (yet highly profitable) situation called a “tender offer.”

I know the name sounds a bit stiff. But if one comes along when you hold a closed-end fund (CEF)—particularly a CEF you bought when it was particularly oversold—wow.

You can find yourself sitting on a fast gain as well as a high dividend payout (as I write this, the average CEF yields around 9%).

As we’ll see in the case of one CEF below, a tender offer can take a fund purchased at an 11.5% discount and let the shareholder cash in a chunk of their holding at nearly full value.… Read more

This latest shift toward interest rate hikes has sent income investors into a tizzy. That’s great for us, because they’re tossing out one terrific fund kicking out a 7.8% dividend that’s grown.

This smartly run corporate-bond fund is now on the table for 11.9% below the value of its portfolio. That not only positions this fund (a closed-end fund, or CEF, to be exact) for future upside—it helps cushion its portfolio, letting us collect its 7.8% payout in peace as the Fed raises rates.

I know that may sound strange: Usually higher rates are bad for bonds, especially for funds chock full of bonds that pay out “old” rates that may be lower than the “new” interest rates likely to come.… Read more

One thing we love to find as income investors? A situation where a double-digit dividend is coming our way—at an undeserved double-digit discount.

Every now and then, a situation like that can get truly extreme. These are the times when we really want to take a closer look.

This is the kind of setup we have with a closed-end fund (CEF) called FS Credit Opportunities Corp. (FSCO) right now.

I’ll cut right to the vitals. As I write this, FSCO yields 13.7%.

The discount? It sits at 27%.

In other words, this fund is now on the table for just 73 cents on the dollar.… Read more

Covered-call funds give us something we demand at a time like this: outsized 8%+ payouts!

And the last few months have shown us something else: These funds work—especially when you use them in a specific kind of market (hint: conditions just like those we’re facing now).

Covered-Call Funds “Translate” Option Gains Into 8%+ Dividends

Even though the name sounds complicated, covered-call funds have a relatively straightforward setup behind them. They start by letting you hold a bundle of stocks, just like, say, an ETF would. In the case of the covered-call fund we’ll talk about today, the Nuveen S&P 500 Dynamic Overwrite Fund (SPXX), these are the companies in the S&P 500.… Read more

Usually in this space, we dig into 8%+ paying closed-end funds (CEFs) set to hand us strong returns and large income streams.

Today, we’re going to do something different and discuss a once-great fund that, sadly, is far past its glory days.

Why?

Because this fund highlights one of the dangers of high-yield investing. That would be the risk of getting too comfortable with a large payout—and ignoring the signs telling us it’s time to take our profits and walk away.

That’s not easy for those of us who invest for dividends! Especially when you have an income stream as big as the one this fund offers (a 12.7% annualized yield) rolling in.… Read more

The numbers are starting to support something I’ve long argued about AI: Yes, this technology is shifting the job picture—but it’s not throwing millions out of work.

Instead, the economy is shifting.

The new story? While tech-sector jobs are being cut (temporarily, I believe), growth in other areas—including those that are employing AI to drive growth (and hiring along with it)—is flourishing.

Investors, however, still haven’t caught on. And an ongoing stream of dour headlines—from a “hot” war in Iran to a trade war with Canada—has distracted them further.

That’s set up an opportunity in high-yielding, equity-focused closed-end funds (CEFs) like the Liberty All-Star Equity Fund (USA), payer of a blockbuster 11.4% dividend.… Read more

Look, we all know the old “truism” of investing: Want higher returns? You’d better be prepared to take on higher risk.

That’s not always true, however. In fact, sometimes markets do strange things, and a so-called “conservative” investment can turn around and deliver stunning returns. This is even more common in the world of closed-end funds (CEFs), where even stranger things can happen than in the “regular” stock world.

That’s in part because CEFs are a small market, so they tend to draw more individual investors, but fewer hedge funds and big banks. That can cause CEFs to overreact to some changes in the economy and markets and underreact to others, setting the stage for those strange moves I just mentioned.… Read more

We don’t often see the European Union as a major driver of stock returns.

I mean, American investors usually see the EU as stuffy and overregulated—when they think about it at all! But I urge you to reconsider, because this could be about to change.

When it does, funds with exposure to the continent—including an 8.5%-yielding closed-end fund (CEF) called the Allspring Global Dividend Opportunity Fund (EOD)—could catch a lift.

Let me be clear: This potential boost from Europe is only one reason to take a look at EOD. The main one is the fund’s discount to net asset value (NAV, or the value of its underlying portfolio).… Read more

Right now—today—we’re looking at a terrific buy window on 8%+ yielding closed-end funds (CEFs). Concerns over higher interest rates have put some of these often-ignored income plays on sale.

So today, we’re going to take a closer look at them. We’ll start by debunking a CEF myth called “return of capital,” or ROC, that has caused many investors to miss out on the sustainable high income streams these funds offer.

Let me be clear on what they’re missing out on. On average, the S&P 500 yields about 1% today and posts total returns of about 8.5% per year. That means a million bucks in the S&P 500 will earn about $85,000 in profit on an annualized basis, but just $10,000 of that would come in the form of dividends.… Read more

Let’s talk about this latest pop in Treasury yields and what it really means for those of us looking to save for (and generate reliable income in!) retirement.

Because the truth is, it means something completely different than what the mainstream media is trying to sell us. In fact, this situation sets up an opportunity for us to lock in high yields—I’m talking north of 6%—the longer it keeps up.

To be sure, the yield on long-term government debt is on the rise. At around 5.2% as of this writing, yields on 30-year Treasuries are now just below a high not seen in 19 years.… Read more