Updated: August 20, 2020
Have you read the latest? The media says municipal bonds, our favorite plays for safe, tax-free dividends, are facing a surge in defaults.
That, of course, sounds like terrible news for “munis,” which are issued by local governments to fund infrastructure. Munis’ government backing is a big reason why their default rates are microscopic: typically around 0.01%.
So are our rich, tax-free dividends really about to be stolen away by a wave of defaults? No way! In fact, now is a great time for us contrarians to move into these stout dividend plays.
And when you buy your munis through another income favorite of mine, closed-end funds (CEFs), you get something truly special: 5% yields that, due to their tax-free-nature, work out to much more: if you make, say, $150,000 a year, your “true” payout on a 5% muni-CEF is a sky-high 6.9%.… Read more