Author Archive: Michael Foster

If you invest in closed-end funds (CEFs) or are thinking about it (and you should be!), I’ve got great news: there’s one simple indicator that tells you exactly when to buy (or sell) these high-yield income plays.

(If you’re a member of my CEF Insider service, you probably know what I’m going to say next.)

I’m talking about the discount to net asset value (NAV), which you can find on pretty well any fund screener. Today we’re going to see how one group of investors rode this simple metric to an amazing 662% in gains and dividends.

Your 1-Click CEF “Buy Alarm”

The discount to NAV is unique to CEFs.… Read more

Today we’re going to dive into the three best closed end funds of all time. These retirement-changing dividend plays—yielding all the way up to 8.6%!—have not only been crushing all other CEFs, but they’ve been demolishing the S&P 500, as well.

That’s just not supposed to happen!

After all, the pundits are constantly telling us that actively managed funds should not beat the S&P 500, and you’d be better off with a low-cost index fund like the Vanguard S&P 500 ETF (VOO).

But these three CEFs have been crushing VOO for years—and they’re on track to keep doing so.

That’s not all they offer—these funds also pay dividends more than three times higher than the S&P 500 average, boosting your nest egg while giving you a much bigger cash stream than you could ever get from index funds.… Read more

If you’re like most people, you’re wondering how in the world the market can be doing this when the country has been on lockdown for the better part of two months:

Stocks Soaring

As you can see above, stocks spiked 22% since late March, going by the performance of the Vanguard Total Stock Market ETF (VTI). Meantime, the economy is a shadow of its former self: the Federal Reserve expects it to shrink 40% in the second quarter—worse than the 23% drop seen at the depths of the Great Depression.

Before you ask, no, this disconnect isn’t a recipe for another crash.… Read more

There’s a strong buying opportunity unfolding in an ignored corner of the market right now. Steady dividends of 5.8% (and higher) are waiting for savvy contrarians who jump on it.

By “savvy contrarians,” I, of course, mean us!

And the corner of the market I’m referring to is municipal bonds.

If you’ve been following the muni-bond saga over the last two months, you might find my enthusiasm a bit unfounded. After all, the coronavirus is hammering the finances of cities and states across the country and driving up the risk of muni-bond defaults—right? Not so fast.

Your Muni Default Risk? 0.042%

To cut through all the hype surrounding munis these days, we need to zoom out a bit.… Read more

Volatility has taken over, and if you’re like most folks, you’re wondering where to find the safe dividends you need to sustain your savings—and income stream—as this pandemic drags on.

There’s one intriguing alternative you may not have thought of: senior loans, also called floating-rate loans. Because they’re far up the corporate food chain, they offer a layer of safety in the event of bankruptcy, something that’s on every investor’s mind these days.

In addition, senior loans offer yields of 6%, on average, making them an income investor’s dream, too. But are these loans—which I only recommend holding through a closed-end fund (CEF)—a buy today?… Read more

Has this market gone too far, too fast? Is another crash coming? And what the heck should we be buying now?

I’ll dive into all three questions today, and I think my answer to that last one will intrigue you: it’s a tech-focused closed-end fund (CEF) paying a growing 7% dividend! This under-the-radar fund also employs an unusual strategy that hedges its downside if we do get another pullback.

The One Number to Watch Now

Let’s start with where I see the market headed from here.

At its worst point in this latest crash, the S&P 500 lost about 30% of its value, and it did so in less than a month, only to begin recovering a few weeks later.… Read more

Don’t listen to the permabears: they’re wrong when they tell you that the massive borrowing America is undertaking to fend off the coronavirus will cripple the economy for years to come.

You’ve no doubt heard this argument—it’s an old trope the talking heads roll out to scare investors into selling their stocks and stuffing cash in their mattresses. Imagine being frightened into selling in late March. You would have sold right at the bottom of this:

Giving in to Media Hype Here …

And if you were still sitting in cash today, grinding your teeth and wondering when you should get back in, you’d have already missed this:

… Locks in a Big Loss Here

And this doesn’t include missed dividend payments—payments you’ll continue to miss the longer you sit on the sidelines!… Read more

The dividend-cut parade is starting on Wall Street, and we need to be on the lookout for “payout traps” that could be hiding in our portfolios (often in plain sight).

That task is made tougher because some companies are using unconventional approaches to cutting their payouts. Take the Walt Disney Company (DIS), which released first-quarter earnings last week. Included: news that Disney wouldn’t pay out dividends for the first half of 2020.

Disney’s Dividend Growth Stalls

After decades of growing its payouts (that dip you see in 2012 above is when the company went from annual to semi-annual payments—annualized payouts actually went up 19% that year), Disney isn’t outright announcing its dividend cut; it’s simply telling investors they may have to wait to get cash in their hands.… Read more

Subscribers to my CEF Insider service are asking me a lot about corporate bonds these days, so today we’re going to take a close look at it—and what it means for bond funds.

First, let’s talk about interest rates, which are plunging.

Debt Getting Cheaper 

This means companies pay a lower rate than ever when they issue bonds. When rates fall, it can make sense to take on more debt, because you can use that debt to raise cash. If you don’t need that cash, you can pay off the debt later at a low cost because, again, rates are so low.… Read more

If you’re like pretty well everyone else, you’re closely watching Gilead Sciences (GILD), creator of remdesivir, a drug that, last week, showed progress in treating the coronavirus in a US government study.

But does that make Gilead a good stock to buy now, particularly if you’re focused on income? Let’s take a look.

First up, unlike many other stocks these days, Gilead boasts a safe payout, with the dividend accounting for just 38% of free cash flow in the last 12 months. And the company has increased its dividend every year since initiating it in 2015:

A Reliable Dividend

It’s on the current-yield front where the dividend story starts to fray.… Read more