Author Archive: Michael Foster

Right now—today—we’re looking at a terrific buy window on 8%+ yielding closed-end funds (CEFs). Interest rates are maxed out (and let’s be honest, they’re headed lower—even if “go time” on cuts has been pushed back a bit).

That will drive up the appeal of CEFs, thanks to their outsized income streams.

So now is a great time to take a look at these (too) often overlooked income generators. Today we’re going to do just that. We’ll start by debunking a CEF myth called “return of capital,” or ROC, that has caused many investors to miss out on the sustainable high income streams these funds offer.… Read more

Don’t believe anyone who tells you there’s such a thing as a safe investment. Truth is, every asset—from Treasuries to houses to dividend stocks—involves risk.

The “safest” investment, according to the Financial Industry Regulatory Authority (FINRA), is a short-term US Treasury bill. You lend the government $100, say, and you’ll get $105.17 back in a year. Not bad.

But there are some caveats:

1. Short-term Treasury rates fluctuate, and the Federal Reserve has said they’ll try to get them lower later this year.
2. In a truly apocalyptic disaster, you might find that the Federal Reserve doesn’t pay your money back. In fact, you might find that money itself is worthless.

I have to admit, every year it gets harder and harder to do my taxes.

The process isn’t any more difficult—or at least if it is, my accountant isn’t saying! No, my problem is the money I end up owing.

Having to write a check to Uncle Sam for more than I earned in my first three years of working is hard to do. Which is why I’m always looking for ways to cut my taxes.

And really, the best way for me (and most likely you, too) is through a “boring” sounding investment called a municipal bond. There are three reasons why:

1. Municipal bond, or “muni,” returns can amount to more than 9% per year for those in high tax brackets.

It’s starting again—the media has its hooks into a new story to scare investors, in yet another effort to gain attention.

The upshot is that we’ve now got a very nice opportunity to pick up a special kind of closed-end fund (CEF) that yields 7%+ and does something unusual to limit downside.

This setup reminds me just a bit of 2022, when buying fear gave contrarians bargains, and historically high dividend yields, too.

The Media-Driven “Crisis” That Doesn’t Exist

Let’s start to trace out our opportunity here by first talking about the media, which I probably don’t have to tell you is more interested in getting an emotional reaction (mainly fear and worry) out of its audience more than anything else these days.… Read more

It’s Tax Day—the perfect time to talk about one of our favorite income plays: municipal bonds.

Don’t listen to anyone who tells you “munis” are boring. They’re anything but: It’s easy to grab 5%+ yields from them. And because munis’ income is tax-free for most Americans, that 5% is worth more—in some cases a lot more—to us.

They’re stable, too. Consider how much better you’d have slept at night if you held munis during the 2022 nightmare, when they held up much better than stocks:

2022 Put Muni Bonds’ “Crash Resistance” on Display

Truth is, yearly declines of any sort are unusual for munis, which tend to deliver 5% to 6% annual total returns in the long run—and that’s before their tax benefits, which are, quite frankly, game-changing.… Read more

There’s no sugarcoating it: As I write this, our favorite high-yielding income plays—closed-end funds (CEFs)—are lagging behind “regular” stocks.

But that doesn’t mean I’m opening this article on a sour note. Truth is, this underperformance is good news for us, as these unloved (and cheap!) 8%-payers are long overdue for a “snap back” to normal.

The result is a (likely short-lived) buying opportunity we’re going to break down now—especially as it relates to the 6.7%-paying Adams Diversified Equity Fund (ADX), a core holding (and buy recommendation) of my CEF Insider service.

But let’s start with that performance lag.

CEFs Get Caught in Stocks’ Wake

Source: CEF Insider

Over the last year, CEFs focusing on stocks (measured by the performance of our proprietary CEF Insider Equity Sub-Index) have returned 8.9% as of this writing, well below the stock market’s 28.5%.… Read more

Let me start today’s article with an admission: Closed-end funds (CEFs) are my passion—but not only for their 8%+ dividends (often paid monthly).

The main reason I’ve been investing in these terrific high-yield vehicles for years is, in fact, very personal: Over a decade ago, CEFs’ high yields gave me enough passive income to quit my job.

I was a professor at the time, and I decided to quit to live on my income. As I started preaching the gospel of CEFs, more people heard the call, and my CEF Insider advisory, launched back in the spring of 2017, was born.… Read more

It’s no secret that corporate bonds are booming. But what might come as a surprise to some folks is that we’re not too late to get in. Through a group of well-run closed-end funds (CEFs), we can still tap big corporate-bond yields at a discount.

Even perennially gloomy Business Insider (notorious for its overdone calls for an inflation/recession-driven crash in 2022) acknowledges the terrific environment for bonds right now. Recently, BI had to admit not only that “Corporate bonds are the safest they’ve been in years,” but that this is one of the best bond markets we’ve ever seen.… Read more

Let’s talk about convertibles for a second—but not the car with a removable top that everyone thinks of when they hear that word: I’m talking about convertible bonds.

I know, a bit less flashy, right? The name causes most folks’ eyes to glaze over, but there is a (very) exciting part to this convertible-bond story: massive dividend yields. And I’m not talking the type of so-called “high” yields you get on regular stocks (3% or 4%). Or even corporate bonds, many of which pay out in the 6% to 7% range these days.

I’m talking really high yields here. Like 12% yields.… Read more

I know that no one wants to talk about the 2020/2021 lockdowns anymore. But those dark days did do one critical thing for the high-yield corporate-bond market: made these so-called “junk bonds” too big to fail.

And investors are just starting to come around to that fact.

The takeaway is that we’ve got a nice opportunity to grab historically large, and stable, dividends from corporate-bond funds, including a closed-end fund (CEF) we’re going to focus on in this article: the PIMCO Dynamic Income Fund (PDI).

Long-time readers of my articles here on Contrarian Outlook, as well as my CEF Insider advisory, will recognize PDI.… Read more