Author Archive: Michael Foster

We’ve seen a big bounce (and 12%+ dividends!) in one particular type of closed-end fund (CEF) this year—and all of my buy indicators suggest this profitable play is still in its early stages.

Specifically, I’m talking about tech-focused CEFs—which we’re getting a nice second chance to buy thanks to last week’s earnings whiffs from the likes of Apple (AAPL) and Alphabet (GOOGL).

Buying a tech CEF is like buying an ETF that focuses on technology, but with two key differences:

• Big dividends: the CEF we’re going to analyze today yields 12.1%—and it pays dividends monthly, too. You and I know that both of these things are unheard of in the world of “regular” stocks and funds.

We’ve been getting a number of questions from CEF investors in the last few weeks about return of capital, or ROC.

This is a measure that shows up regularly with CEF dividends—and it makes many folks wonder if their funds are simply handing back the money they’ve invested as part of their payout.

(Note that much of what we’re going to discuss below is tax related. I’m not a licensed tax professional, so I can’t give you tax advice. You should consult a tax professional for details on your own personal situation.)

First, let’s be clear that all CEFs that are publicly traded on US exchanges are actively investing in something, with funds specializing in municipal bonds, real estate, stocks, preferred shares, real estate investment trusts (REITs) and other assets.… Read more

Imagine what you could do with a 19% dividend.

To be clear, any dividend that high simply isn’t sustainable. So if you do see one, I don’t recommend buying.

Still, the thought’s nice. With a 19% yield, financial independence becomes easy. Want to live on $60,000 per year? Well, conventional wisdom says you’ll need at least $1.5 million to generate that kind of income, and some advisors will tell you to save $2 million, just to be safe.

But a 19% dividend? Suddenly it only takes $316,000 in savings to secure $60,000 in yearly income. That cuts down how long one needs to work and save by decades.… Read more

These days, it seems like every investor is chasing that one big thing that will make them rich—the newest stock, technology, fad or whatever.

We contrarian dividend investors know these folks well—you probably have a friend or family member who chased down gains in crypto, NFTs, profitless tech or heaven knows what else over the last few years.

Heck, they may have even taken a poke or two at you about your “boring” dividend stocks and closed-end funds (CEFs)!

Then 2022 came along. And while everything got hit last year, we CEF investors had the last laugh, as we could use our funds’ 7%+ dividends to pay the bills.… Read more

As I write this, stocks are in the process of giving back some of their “New Year’s bounce”—and I’m hearing from folks who are worried that 2023 will be another 2022.

I get it—it’s only natural to feel that way after the S&P 500 fell some 20% in a year. And those who limited themselves to the tech-focused NASDAQ took it particularly hard—off some 30%+ in ’22.

But just because the market is off to an uncertain start does not mean we’re headed for another mess like last year. In fact, the odds of that are very low.

For one, it’s rare to get two bad years in a row.… Read more

There’s a quiet shift happening in closed-end funds (CEFs)—and it’s primed to give those who buy now some very nice upside in 2023.

And that’s in addition to the rich 7%+ dividends CEFs hand us.

That trend is a shift toward share buybacks, which you likely know about from the stock world. Buybacks work similarly with CEFs, but with an extra punch: they keep CEFs’ discounts to net asset value (NAV) from getting too wide—and they can even narrow those discounts, slingshotting the share price higher as they do.

In other words, by helping close CEFs’ discounts, managers have some control over the fund’s market price in a pullback, and they can amplify its gains when the market turns higher.… Read more

Today we’re going to build ourselves a portfolio that hands us a 10.5% yield. And we’re going to do it with just three funds.

The appeal of a 10.5% payout is tough to deny: when you’re getting that much of your investment back every year in dividends, you’ll recoup the whole thing in less than 10 years. Everything else is gravy!

What’s more, two of the three funds below—all of which are closed-end funds (CEFs)—pay dividends monthly, so we’re getting our payouts in line with our bills. That’s unheard-of in the world of vanilla stocks. Almost all of them make us wait three long months for our next payout.… Read more

There are three big overlooked trends in the stock market now, and by tapping each one, we can set ourselves up for some very nice long-term gains in my favorite high-yield vehicles: closed-end funds (CEFs).

The 11.8%-yielding CEF we’ll discuss further on, the BlackRock Innovation & Growth Trust (BIGZ), is a prime example of a CEF with loads of upside potential now. I’ve also got a collection of buys yielding up to 9.6% on average (with many paying dividends monthly) waiting for you in the portfolio of my CEF Insider service.

Inside 2023’s “Double Discount” on CEFs

CEFs’ high dividends are one reason why we favor these funds.… Read more

This market has reached a once-in-two-year turning point. And it’s made our favorite income investments—closed-end funds (CEFs)—terrific contrarian buys.

That’s because the best of these funds pay high dividends, usually on the order of 7%+ yields, that can get us through a market downdraft. The vast majority of CEFs pay dividends monthly, too.

Then, when markets bounce, our CEFs’ discounts to net asset value (NAV, or the value of the stocks in their portfolios) snap shut, giving their prices an extra shove higher. The 7.9%-yielding CEF we’ll talk about in a second is a perfect example: its discount rises and falls in a predictable cycle, and that discount is now sitting near once-in-two-year lows.… Read more

Investors often ask me when it’s time to sell a closed-end fund (CEF)—or what to look for in a CEF they should avoid buying in the first place.

With 2023 now dawning, bringing a raft of challenges—and opportunities—for those of us who love high-yield CEFs, now is a good time to tackle this question. And it so happens that I’ve run across a good CEF to use as an example: the Guggenheim Strategic Opportunities Fund (GOF). 

The big eye-catcher with this fund is its blockbuster 14.4% yield, which we’ll come back to in a second. First, let’s discuss the most important metric for telling whether your CEF is overvalued—and thus ripe for a drop in price.… Read more