A wild year like 2020 is a great acid test for closed-end funds (CEFs)—and it can tell us a lot about which of these high-yield plays to pick (and avoid!) as we move deeper into 2021.

A Split Market

If 2020 did anything, it widened the gap between winning and losing sectors of the stock (and closed-end fund) market. It just goes to show how critical it is to pick funds in the right sectors, as well as those with savvy management that can shift with the times.

Technology, of course, boomed last year. At my CEF Insider service, we were well-positioned in tech with the BlackRock Science and Technology Fund (BST), which we added to our portfolio in August 2019.… Read more

If we learned anything from 2020, it was the value of a few extra rolls of toilet paper. A close second? The reminder about the value of a reliable dividend.

This lesson has been taught over and over. The dot-com bubble. The Great Recession. The “COVID crash.” And sure enough, first-level investors don’t learn a thing—they chase one fat yield after another into the ground.

We next-level income investors know better. It’s important to consider the business engine under the hood. When we find cash flow machines like the eight dividend payers we’re about to discuss, we’re talking about decades of payments.… Read more

I don’t know about you, but I’m ready to say farewell to this whole Reddit/GameStop (GME) situation.

But before we bid adieu to this weird market moment, we need to take just one more run around the horn, because it’s left three big benefits in its wake that no one is talking about right now.

These three hidden catalysts all point to stronger market gains in the weeks and months ahead—gains we can “convert” to 7%+ dividends when we pick up one of my favorite investments, stock-focused closed-end funds (CEFs), right now. Let’s dive in.

Reddit Gamblers’ Wins Will Go Into the Economy (and Boost Other Stocks)

The most immediate positive for the market comes from the big gains early investors in GameStop and other companies at the center of this battle enjoyed.… Read more

Another hand went up. I pointed for the next question.

When you consider dividend investments, Brett, what is more important in your opinion:

• The current yield and value of the stock itself, or

• The “engine” that is driving the business and the profits?

“Great question,” I replied. “The business engine. Always consider where the cash flow is coming from, first.”

In other words, if the business is humming, the dividends will be there. And as the payout keeps chugging along, so will the stock price. A dividend will protect the stock from downside and, with growth, provide a sweet kicker of upside.… Read more

You and I both know there’s a problem with the sugar high the stock market’s been on. Does it mean we should dump some of our beloved dividend stocks and try to buy them back at lower prices?

We’ll talk income strategies and market timing in a minute. First, let’s talk about these concerning behaviors exhibited by America’s odd couple, Mr. and Mrs. Market.

First up, we know a correction is coming. When a group of folks on a Reddit message board can drive one stock—GameStop (GME)—up 1,700%+ in a month, you know the market has become a bit unhinged.… Read more

With stocks crowding all-time highs, we need to follow our contrarian instincts now more than ever.

That, of course, means going where everyone else isn’t.

And the best contrarian investment I can think of right now is municipal bonds, or bonds issued by state and local governments to pay for vital infrastructure.

Don’t click away! Because these “sleepy” bonds boast dividends so high that, simply by buying them, you could match, or even beat the stock market’s long-term historical return (around the 7% to 8% range) in dividends alone.

Better still, “munis” boast the highest stability on the market, so we’ll be “backstopped” by rock-steady prices while we collect our outsized dividends.… Read more

The markets sure turned against “the little guy” in a hurry.

We chatted about the massive run-up in GameStop (GME) on Wednesday. I had a buddy of mine, who just happens to be a loyal Reddit reader, catch “short squeeze” fever.

If these guys and gals had tried to go anywhere, they’d have been stopped by the temperature check. That’s how hot they were running as Wall Street big shots were being forced to “buy back” their previously shorted GME shares at astronomical prices.

But short squeezes are often short lived, and GME has already plummeted two-thirds below its peak. Why the carnage?… Read more

Over the last few days, my inbox has been filling up with questions from readers about how this GameStop (GME) drama will affect their dividends, their pensions and even their retirement.

Let me say off the top that if you’re invested in top-quality stocks and funds for the long haul, you have nothing to worry about. In fact, this entertaining episode in financial history has created a nice opportunity for us to add to our positions in high-yielding closed-end funds (CEFs).

We’ll dive into that in today’s column, along with the most common questions I’m getting about this unique time in financial history.… Read more

Can you explain GameStop (GME) stock to me?

My buddy who texted isn’t usually into stocks. They are too quaint for him—heck, bitcoin has become too mainstream for him. Something was up.

Sure enough, I checked the GME chart, and whoa! What a move. And that was before last week’s moonshot, which propelled the stock to insane 1,000%+ month-to-date gains.

GME became famous on a website called Reddit, which lets users banter about common interests. Its financial-focused wallstreetbets board has been given credit for coordinating the GME buying and subsequent moonshot.

Which, as far as I can tell, is true. But it’s important to note that the money managers who lost their fortunes in the trade have only themselves to blame.… Read more

This GameStop madness is a clear and present danger to our dividends.

Let’s stop and look at exactly what it means for our income streams, and what we’re going to buy to protect ourselves (and cash in with monthly payouts up to 8%!)

When the Dumb Money Runs, We Need to Be Careful

The whipsawing shares of GameStop (GME), AMC Entertainment Holdings and others are classic cases of “dumb money” in action: they’re among the many short squeezes breaking out across the market—where short sellers, including hedge funds, betting against a stock lose big as buyers bid the stock up in an effort to “stick it to the suits.”… Read more