Author Archive: Michael Foster

By now I’m guessing you’ve heard of the FIRE movement—you may even know someone who’s following this “extreme” form of retirement saving.

An acronym for “financial independence, retire early,” FIRE advocates look to retire earlier than the traditional age of 65—and I mean way earlier. Some even clock out in their 30s!

They do it by building up a huge cash hoard over a period of years, then making steady withdrawals (with some going by the flawed 4%-withdrawal rule) to sustain themselves. Some keep working during their “retirement”; others clock out entirely.

I was thinking of the FIRE folks this week and wondering how they’d fare if they tapped into the wealth- (and income-) generating power of closed-end funds (CEFs), which boast monster yields, sometimes north of 10%.… Read more

What if I told you there are 152 funds out there that yield 7%+? And many of these stout income plays are even safer than the typical S&P 500 stock! They hold the household-name stocks we all know, as well as high-quality corporate bonds, senior loans, real estate investment trusts (REITs)—just about any asset class you can think of.

I’m guessing you’d be interested, especially with the S&P 500 dribbling out a pathetic 1.3% yield these days, and 10-year Treasuries paying 1.35% (and handcuffing our cash for 10 years in return!).

So today we’re going to dive into these 152 income juggernauts and tease out three of the best ones (average yield: 7.4%) for you to consider now.… Read more

Let’s talk about a fund that seems to tick all the dividend-and-growth boxes we income investors demand.

Low fees? Yep. High yield? How does a 7.7% payout (nearly six times the S&P 500 average!) sound? Low volatility? You got it: this one sailed through the 2020 COVID crash, compared to the pummeling the broader market took.

One thing you should know upfront is that the fund we’re going to delve into today is an ETF, not a closed-end fund (CEF)—though we will talk about an intriguing CEF in a moment, too.

At my CEF Insider service, we don’t usually talk much about ETFs—except to skewer them for their typically low yields!… Read more

It pains me when I see regular folks take the flawed “advice” to simply plow their money into an index fund and call it a day.

The biggest problem with this “strategy” is there’s basically no income: the SPDR S&P 500 ETF (SPY) yields just 1.2% today, so you’d need a million-dollar portfolio just to generate a pathetic $12,000 a year in dividends!

Poverty-level income on a million bucks! That’s unacceptable. And it’s precisely why I’m going to share a much better option with you—yielding an mammoth 7.8%—in a moment.

I was thinking about the “lazy” ETF strategy recently when I was reading a blog post by fintech startup Acorns, which suggested going with an ETF like the Vanguard Total Stock Market ETF (VTI), which invests in a whopping 3,935 US companies of all sizes, and combining it with the Vanguard Total International Stock Index (VGTSX) for international exposure.… Read more

If anyone tells you that all the big dividends have been bought up in this inflated market, do yourself a favor: tune them out.

Because while stocks are up—and dividend yields are down as a result—there are still high, cheap payouts to be had out there. And we closed-end fund (CEF) investors know exactly where to find them. In a moment, we’ll nail down a couple of funds that are still attractively priced today, and they pay you 6%+ dividends, to boot.

That said, deals certainly aren’t falling out of trees in CEFs these days—we have to dig deeper to uncover them than we ever have before.… Read more

Overbought stock markets—and pathetic 1% dividends—here in the US just might have you tempted to look overseas for higher payouts.

It’s a smart move. After all, plenty of countries offer investors higher dividends than America. For example, the yield on the FTSE 100 index, which consists of the 100 biggest companies on the London Stock Exchange by market cap, is 3.4% today, nearly triple the average S&P 500 payout of 1.3%.

(And you can get strong diversification across the globe—with a strong North American base—when you buy the 8%-yielding fund we’ll get to shortly.)

But as we discussed a couple weeks ago, we need to steer well clear of (or at least be very careful with) any exposure to China, because as fast as the country’s growth has been, the governing Chinese Communist Party’s respect for free markets is questionable—and has been growing more so of late.… Read more

Something weird is happening in the housing market, and it’s handing us an outstanding opportunity in stocks (including the 8%-yielding pick we’ll dive into shortly).

I know that’s an odd statement. After all, how can housing and stocks really be that connected? And how can we be so optimistic about housing when it has already soared in the last 18 months, and bubble warnings are everywhere?

The answer is that, as we contrarians know, the way the headlines make things appear in the markets is often very unlike how they actually are.

Look at the chart below, which shows, on the right, the average monthly mortgage payment over the past 45 years, in five-year increments, on the typical home (using the median average house price for each year, minus a 10% down payment).… Read more

It’s hard to believe, but there actually is a 10% dividend sitting right under investors’ noses—even now, when the typical S&P 500 stock dribbles out a pathetic 1.3% payout.

That 10% payer is a closed-end fund (CEF) called the Liberty All-Star Equity Fund (USA). We’re going to put this fund in the spotlight today, so we can see how it offers such a large dividend in these income-lean times, and whether it may be for you.

Let’s start with performance: USA has delivered a total return far larger than that of the market in the last five- and 10-year spans (as well as in the last three years, one year and for 2021 so far).… Read more

As dividend investors, we don’t usually read the tea leaves in employment reports (that, after all, is the domain of economists!). But there is something happening in the working world that’s set to power the payouts, and prices, of a select group of closed-end funds (CEFs) for years to come.

That is this: people are spending less time in the office. But productivity isn’t falling. And of course, demand for workers is surging right now, setting the stage for pay hikes, bonuses, stock options—just about any way to put more money in workers’ pockets that you can think of.

Employment Roars.… Read more

These days, many of the dividend investors I talk to feel squeezed between:

1. Weak yields (which have plunged as stocks have surged) and
2. High taxes (which are likely to rise further).

You’re no doubt feeling this pinch, too. The good news is that there’s an investment that lets you wiggle out of this trap, regularly offering steady-as-she-goes dividends up to 5%.

There’s another nice twist that works in your favor here, because these payouts are tax-free, so they could be worth a lot more to you—I’m talking payouts north of 7.5% with tax savings factored in, depending on your tax bracket.… Read more