Author Archive: Michael Foster

Let’s talk about last Friday’s market crash and the wobbly markets we’ve seen since. Because at times like this, our closed-end fund (CEF) dividends are a key tool to help see us through.

As seasoned CEF investors know the standout strength of these 500 or so funds is their high payouts, which yield around 7%, on average today. Payouts like those can tide us over until we get to the other side of a market meltdown.

So what’s our strategy? In CEF Insider, as with all of our Contrarian Outlook premium newsletters, we’re staying light on our feet, ready to sell struggling holdings quickly, and to pick up bargain-priced dividend payers when they appear.… Read more

Today I want to show you how to do the unthinkable and retire in seven years—starting with a $0 nest egg. Our plan hinges on two things: being frugal and investing in closed-end funds (CEFs), which throw off big, steady dividends on the regular.

I know a plan like this sounds impossible. Stocks, after all, are testing 52-week lows; the Fed is quickly raising interest rates; inflation is still on a tear; and a war is raging in eastern Europe.

To be sure, these things are all weighing on the markets now. But there is one great thing about investing these days, and it’s on the income side of things.… Read more

This selloff has gone on seemingly forever, and I’m hearing from more investors who are feeling nervous.

I understand completely. Days of red on the indexes are tough on all of us, myself first and foremost. But the key thing to keep in mind as the world seems to be spinning out of control is that when times like these come along, our CEF strategy proves its worth, for two reasons:

• Our CEF dividends are helping us through the correction, as they have for all the pullbacks we’ve been through since we launched my CEF Insider service in 2017. Our portfolio yields 8.3% today, and 17 of our 23 holdings pay dividends monthly, so those payouts arrive in line with your bills.

When we’re faced with a situation like today’s, with inflation and interest rates on a tear, we want dividends that keep us ahead of rising prices while hedging us against volatility.

Luckily, there’s a selection of high-yield closed-end funds (CEFs) that do just that. We’re going to look at three that yield 9.9% on average today, plus they give us the diversification we need to withstand market shocks.

And with a 9.9% yield, you could use these stout income generators to pay your bills on a modest investment, avoiding the need to sell into a downturn to augment your income. Heck, a retiree with $500K could generate $4,125 a month in dividends!… Read more

Let’s test the common “wisdom” that a double-digit dividend is unsustainable. The closed-end fund (CEF) we’re going to discuss today turns that notion on its head!

I’m talking about the PIMCO Dynamic Income Fund (PDI), which, as it says in the name, is run by boutique CEF house PIMCO.

We all know that investors (and consumers in general) love a brand name, and that holds true with CEFs, too: due to the prestige associated with PIMCO’s moniker, its funds usually trade at huge premiums to net asset value (NAV).

Well, to be fair, it’s not just the company’s name that’s behind these premiums.… Read more

If you’ve sat out oil stocks until now, it’s easy to think you missed the boat. After all, oil’s big run has sent shares of producers (and pipeline operators) soaring. That’s meant lower dividend yields—and higher valuations—for folks who decide to tiptoe in now.

But there’s a way we can “turn back the clock” and squeeze 8.1%, 8.7% and even 8.9% dividends out of energy stocks. (These are the actual yields on three overlooked funds I’ll show you in a moment.)

Those are the kinds of yields you could only get back in April 2020, in the teeth of the COVID crisis, when oil stocks were on their backs, their depressed prices sending their yields soaring.… Read more

There’s nothing we closed-end fund investors love more than finding a smartly run fund in an unfairly beaten-down sector. This hands us a nice discount (of course!), plus a much bigger dividend, because yields and prices move in opposite directions.

In fact, with CEFs, we’re actually getting a “double discount”: one from the depressed sector and one from the CEF’s discount to net asset value (NAV, or the value of the stocks in its portfolio). This indicator only exists with CEFs, and we’ll cover 4 with particularly attractive discounts to NAV in a second.

Plus, CEFs already boast yields that triple (or more) those of regular stocks, so deep-discounted CEFs give you an income stream that’s bigger still.… Read more

One thing we love about closed-end funds (beyond the dividends: many CEFs yield 7%+ today) is the big discounts to net asset value, or NAV, that these funds hand us.

These discounts only exist with CEFs. Here’s why: CEFs typically can’t issue new shares to new investors after their IPOs, so their shares get bid up and down on the market, independent of how much their portfolios are actually worth.

These discounts can get quite wide—sometimes 20% and higher. At that kind of a discount, we’re essentially paying 78 cents for every dollar of assets the fund holds!

Our plan, then, is simple: buy when we get an unusual discount like that and then ride along as it vanishes.… Read more

These days, everyone is on guard for a recession. And the inverted yield curve is only adding to those fears.

Sure, a recession may be in the offing, but I don’t see one starting anytime soon. I don’t know about you, but I’ve never seen a recession hit when corporate profits are soaring like they are today—up 40% from pre-pandemic levels and forecast to keep rising:

Source: Wells Fargo Economics

This “profits-up, stocks-down” dynamic (the S&P 500 is still down about 4% from the start of the year as I write this) makes now a good time to buy, particularly if you’re doing so through my favorite high-yield investments: closed-end funds (CEFs), like the one we’ll discuss below.… Read more

Today we’re going to dive into a three-fund portfolio that throws off a massive 9.7% dividend yield and that payout is backstopped by stocks everyone knows well.

With a dividend like this, $500k invested gets you more than $4,000 in monthly income!

Big Income from the Big Three

While you might be suspicious of a 9.7% yield (and rightly so!), these three funds are solid. Their combined holdings are built on large caps like Amazon.com (AMZN), Visa (V) and Microsoft (MSFT). 

They then add in fast-growing tech plays like Bill.com Holdings (BILL), a maker of back-office software for small and medium-sized companies, which is up 500% over the last five years; and chipmaker Monolithic Power Systems (MPWR), which has gained 443% over the same period.… Read more