Articles

Income investors are typically a conservative and prudent bunch. Focused on a sustainable income stream, they often look for a sign to avoid a big price drop.

So when it comes to one of the highest-yielding investments of all—closed-end funds (CEFs)—how can you know when the time has come to sell?

I’ll tackle that question with a 1-2-3 approach to CEFs that will help you avoid the kinds of value traps that promise big dividends but really deliver big losses.

Sell Signs Not Always Easy to Spot

First off, it’s easier to know when to buy than when to sell.… Read more

The U.S. and China held another round of trade talks in Washington D.C. this week, ahead of the looming March 1 deadline for potential tariff increases. Trading activity was relatively quiet during the holiday-shortened week and the Nasdaq Composite Index ended an eight-session winning streak on Thursday.

Fed on Hold, Q4 GDP on Deck

Investors digested the minutes from the January FOMC meeting on Wednesday and Fed funds futures are now factoring in a 92% probability that the committee will take no action with interest rates in either direction in 2019.

Looking ahead to next week, Fed Chairman Powell will be on Capitol Hill on Feb.… Read more

Stock-market selloffs provide great times to buy big dividends. The stock market was a relentlessly receding tide in the fourth quarter, which is bad for “buy and hope” investors but quite helpful for income specialists like us.

Let’s consider high-quality real estate investment trust W.P. Carey (WPC). This REIT looks good at most prices, but the market gave us an exaggerated dip in December-early January that spiked its yield to nearly 6.5%. Savvy, patient investors who bought on this dip (like my Contrarian Income Report subscribers) didn’t just enjoy an excellent yield on the higher end of its five-year range – they also are sitting on 17% gains in just a matter of weeks!… Read more

If you own a diverse portfolio of closed-end funds (CEFs), you’re probably sitting on some nice gains in 2019—and there’s a great chance those gains have crushed the S&P 500.

So here, at nearly the two-month mark, it’s worth pausing to see where things stand, and where we should be looking for the next big winners.

Big Gains Everywhere You Look

So far, the average CEF is up 7.5% in 2019 and February isn’t even over. This run-up is everywhere, with only five of the nearly 500 CEFs tracked by our CEF Insider service slipping on the year.

The few funds that are down have nothing to do with the rest of CEF-land.… Read more

Most income investors find their way to business development companies (BDCs) by screening or searching for big yields. And there’s no doubt these listed payouts do appear impressive! Here are the five largest BDCs (ranked by assets under management):

A first-level look at this table may have you wondering why anyone would buy MAIN when they could nearly double their dividend by choosing another ticker. Well, there’s a good reason that we’ll get to in a minute. First, let’s talk about what BDCs actually do so that we can understand what is driving these big dividends.

It all started in 1940, when Congress passed the Investment Company Act.… Read more

It’s a question I get from investors all the time: “Should I take my dividends in cash or reinvest them through a dividend reinvestment plan (DRIP)?”

My answer: unless you want your cash sitting in your account earning zero, your best bet is to reinvest any dividend money you don’t need to pay your bills.

But we don’t want to practice “buy and hope” investing, either, whether we do it through obsolete DRIPs or the old-fashioned way.

When I say “buy and hope,” I mean putting your cash into household names like the so-called Dividend Aristocrats and “hoping” for higher stock prices when you cash out in retirement.… Read more

Today I’m going to reveal a powerful secret that could boost your dividend income 4X.

I’m talking about a massive 7.5% income stream here (or nearly 4X the yield on the average S&P 500 stock)—and your capital will grow nicely while you pocket your dividend cash, too.

Solid payouts like that put financial independence within reach, because with just $500K invested, a 7.5% yield would hand you $3,125 a month in income. That’s higher than the $2,600 the average American makes.

And unlike that average American, you won’t have to troop off to work every morning to get your “paycheck.” Plus you won’t have to sell a single stock in retirement to pull this off.… Read more

Investors celebrated a compromise in Washington D.C. that allowed the U.S. government to avoid another shutdown ahead of a long weekend. As a reminder, the U.S. markets will be closed next Monday, for the President’s Day holiday.

This week, traders also took solace that trade talks with China appeared to improve. President Trump discussed delaying an upcoming decision on March 1 to increase tariffs and China’s own January trade data showed a surprise 9.1% increase of exports.

Earnings Guidance Trending Lower

On the earnings front, Coca-Cola (KO) turned flat and lost 8% a day after cutting its annual profit outlook. According to Bespoke Investment Group, the beverage producer’s lower guidance is part of a larger trend.… Read more

If you’re worried that stocks are expensive again, well, they are. The current bull market is making a run at history. But it’s also costly to stay in cash (and lock in zero income). Fortunately, it’s possible to buy some downside protection with yield.

I understand the “I’m worried so I’m sitting in cash” concern. And I know many investors who continue to sit on their money and hope for a big pullback. But wouldn’t it be nicer to bank 32% total returns with 8%, 9% or even 10% or more of it coming as dividends?

Our Contrarian Income Report subscribers who smartly stayed with Omega Healthcare Investors (OHI) – a big paying REIT – have done much better than their scared cash hoarder friends, as well as the broader market in general.… Read more

The 2019 rebound has done a lot to revive most people’s portfolios. But there’s a new trap you need to dodge as the market ticks up: the risk you’ll stumble into an overbought stock (or fund).

But don’t take that to mean stocks are pricey—far from it! The S&P 500 is barely up from the start of 2018 and still far from its all-time highs, which is ridiculous when you consider last year’s near-20% earnings growth.

So it’s pretty easy to see that stocks are still ripe for buying.

But there is one sector I am worried about—and it brings me to the first of 3 closed-end funds (CEFs) I want to warn you about today.… Read more