Author Archive: Michael Foster

It’s Tax Day—the perfect time to talk about one of our favorite income plays: municipal bonds.

Don’t listen to anyone who tells you “munis” are boring. They’re anything but: It’s easy to grab 5%+ yields from them. And because munis’ income is tax-free for most Americans, that 5% is worth more—in some cases a lot more—to us.

They’re stable, too. Consider how much better you’d have slept at night if you held munis during the 2022 nightmare, when they held up much better than stocks:

2022 Put Muni Bonds’ “Crash Resistance” on Display

Truth is, yearly declines of any sort are unusual for munis, which tend to deliver 5% to 6% annual total returns in the long run—and that’s before their tax benefits, which are, quite frankly, game-changing.… Read more

There’s no sugarcoating it: As I write this, our favorite high-yielding income plays—closed-end funds (CEFs)—are lagging behind “regular” stocks.

But that doesn’t mean I’m opening this article on a sour note. Truth is, this underperformance is good news for us, as these unloved (and cheap!) 8%-payers are long overdue for a “snap back” to normal.

The result is a (likely short-lived) buying opportunity we’re going to break down now—especially as it relates to the 6.7%-paying Adams Diversified Equity Fund (ADX), a core holding (and buy recommendation) of my CEF Insider service.

But let’s start with that performance lag.

CEFs Get Caught in Stocks’ Wake

Source: CEF Insider

Over the last year, CEFs focusing on stocks (measured by the performance of our proprietary CEF Insider Equity Sub-Index) have returned 8.9% as of this writing, well below the stock market’s 28.5%.… Read more

Let me start today’s article with an admission: Closed-end funds (CEFs) are my passion—but not only for their 8%+ dividends (often paid monthly).

The main reason I’ve been investing in these terrific high-yield vehicles for years is, in fact, very personal: Over a decade ago, CEFs’ high yields gave me enough passive income to quit my job.

I was a professor at the time, and I decided to quit to live on my income. As I started preaching the gospel of CEFs, more people heard the call, and my CEF Insider advisory, launched back in the spring of 2017, was born.… Read more

It’s no secret that corporate bonds are booming. But what might come as a surprise to some folks is that we’re not too late to get in. Through a group of well-run closed-end funds (CEFs), we can still tap big corporate-bond yields at a discount.

Even perennially gloomy Business Insider (notorious for its overdone calls for an inflation/recession-driven crash in 2022) acknowledges the terrific environment for bonds right now. Recently, BI had to admit not only that “Corporate bonds are the safest they’ve been in years,” but that this is one of the best bond markets we’ve ever seen.… Read more

Let’s talk about convertibles for a second—but not the car with a removable top that everyone thinks of when they hear that word: I’m talking about convertible bonds.

I know, a bit less flashy, right? The name causes most folks’ eyes to glaze over, but there is a (very) exciting part to this convertible-bond story: massive dividend yields. And I’m not talking the type of so-called “high” yields you get on regular stocks (3% or 4%). Or even corporate bonds, many of which pay out in the 6% to 7% range these days.

I’m talking really high yields here. Like 12% yields.… Read more

I know that no one wants to talk about the 2020/2021 lockdowns anymore. But those dark days did do one critical thing for the high-yield corporate-bond market: made these so-called “junk bonds” too big to fail.

And investors are just starting to come around to that fact.

The takeaway is that we’ve got a nice opportunity to grab historically large, and stable, dividends from corporate-bond funds, including a closed-end fund (CEF) we’re going to focus on in this article: the PIMCO Dynamic Income Fund (PDI).

Long-time readers of my articles here on Contrarian Outlook, as well as my CEF Insider advisory, will recognize PDI.… Read more

If you watch cable TV or visit financial websites, you no doubt hear about “overpriced” stocks and funds all the time.

A pundit will jump on TV and say something like “Tech is overvalued.” So, by extension, a tech ETF like the Technology Select Sector SPDR Fund (XLK) is overpriced, right?

Not so—at least in a technical sense. An ETF like XLK can be overpriced, but ETFs rarely are.

A fund like XLK collects money from investors and socks it away in stocks. In XLK’s case, we’re talking about big-name techs like Microsoft (MSFT), NVIDIA (NVDA) and Apple (AAPL). But with ETFs, the price you pay tends to be close to how much it would cost to buy all of those stocks separately.… Read more

2024 may be remembered as the year the stock-market recovery “stuck.” While 2023 resuscitated stocks from their 2022 doldrums, it’s been 2024 that got the indices to hold above all-time highs.

Also, unlike 2023, this year’s gains are increasingly broad-based, with nine out of the 11 sectors of the S&P 500 up so far.

The biggest winner? The energy sector, which has been bolstered by particularly strong gains from Marathon Petroleum (MPC), Exxon Mobil (XOM) and Phillips 66 (PSX).

Energy Gains Across the Board

Is this an opportunity, especially for income-hungry investors? After all, energy stocks’ payouts can be massive, with pipelines offering yields well over 10% in many cases.… Read more

Don’t believe the media’s latest line that stocks—and by extension 7%+ yielding closed-end funds (CEFs)—are oversold.

Far from it!

Truth is, stocks—and bonds and real estate, for that matter—are still oversold as a result of the 2022 market crash.

You can see that in action in the chart below, with the benchmark ETF for the S&P 500 (in purple) up 11.1% since the start of 2022, while corporate bonds (in orange) are basically flat. And real estate investment trusts (REITs)—in blue—are still in the tank, down about 16%.

Don’t Believe the Hype: All Our Favorite Assets Are Still Cheap

Fact is, those are all low numbers, even for stocks: the S&P 500 is up an annualized 5.4% over the last two years and change since the start of 2022, which marked the beginning of the market’s swan dive.… Read more

Closed-end funds (CEFs) are incredible wealth generators, combining huge (8%+, in many cases) dividends, with the potential for stock-like price gains.

But to make the most of them, you need to look at one essential indicator: the discount to net asset value (NAV, or the value of the fund’s underlying portfolio).

We don’t have to go too far into the weeds here: it’s just another way of saying that CEFs can, and often do, trade for less than their portfolios are actually worth.

That makes our approach straightforward: Buy when a CEF trades at an unusually deep discount—then ride along as that discount dissipates, driving the price higher as it does.… Read more