Author Archive: Michael Foster

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

With the press bleating about the yield curve inverting (again!) and scaring everyone with recession talk, we dividend (and particularly closed-end fund!) investors need to talk strategy.

I’ll drop a ticker that’s perfectly suited for these weird times in a second. First, let’s dive into what the inverted yield curve is—because it actually sets up a nice buying opportunity for us.

The “yield” in “yield curve” refers to the yields on the 10-year and 2-year Treasury notes. In normal times, the 10-year yields more than the 2-year, but in recent days, that gap has shrunk to nearly nothing:

2-Year Yield Reels in the 10-Year: Recession Ahead?… Read more

If you’re like most investors I hear from these days, you’re suffering from a serious case of market vertigo.

On the one hand, stocks have posted strong gains over the last couple of years: with an annualized average return of over 19% since the start of 2020, the main US indices are up over double their long-term average of 7.5%.

Stocks Soar—Even With the Early 2022 Dive

But of course, the last two months have been stomach-churning, and more pullbacks are likely: the Fed has made no bones about the fact that it plans to raise rates quickly. And while the US economy recently cracked $24 trillion in annual GDP, an impressive 10.5% jump from before the pandemic, that’s still short of the 19% rise in stocks in that time.… Read more

When I talk to investors these days, I hear three main reasons why they’re feeling unsettled. All three fears are interconnected (and none of them will likely surprise you!): inflation, the Federal Reserve and the war in Ukraine.

But the funny thing is, these factors are all actually enhancing the appeal of US stocks right now, particularly if we buy them through our favorite income investments: high-yielding (and often monthly paying) closed-end funds (CEFs).

Let’s take a closer look at each of these fears now, then talk about a CEF that’s well suited to the unsettled investor mood these days. It yields 7%, trades at a particularly attractive 6% discount to net asset value (NAV) and boasts a unique strategy that tones down its volatility and strengthens its dividend, too.… Read more