This 60% Tech Yield Is Getting Attention (Is It Safe?)

Michael Foster, Investment Strategist
Updated: March 11, 2024

We all love high yields—but every now and then we run across one here at Contrarian Outlook that’s so high it’s a blaring warning sign.

Case in point: the 60.4% yield (no, I didn’t misplace a decimal there!) on a tech-focused fund called the YieldMax TSLA Option Income Strategy ETF (TSLY).

That’s right: buy this one and, going by the headline yield, you could recover your upfront investment in less than two years through dividend payouts!

But, well, not so fast: because in this case (as in pretty well all cases when dividend yields strain the bounds of reality), some income-hungry investors are being drawn to a high yield that not only can’t last, but masks poor long-term performance, too.… Read more

My Favorite Way to Invest Like Private Equity (And Earn 10%+ Dividends)

Brett Owens, Chief Investment Strategist
Updated: March 8, 2024

This is how wealthy people invest—and collect yields up to 12.5%.

Private equity (PE) is usually reserved for the rich. It’s the time-honored sport of milking cash from perfectly good businesses! Bleed ‘em dry and keep those dividends coming.

The minimum buy-in for most PE funds? From $500,000 to a cool million bucks or more. This lucrative pastime isn’t meant for the everyman.

Which grinds my gears, my dear friend. This is Contrarian Outlook, dedicated to dividends for said everyman. We have a loophole, and we’re going to share it today.

Business development companies (BDCs) are PE-esque companies. Many trade publicly and we can buy them just like regular stocks.… Read more

Two CEFs Walk Into a Bar … One Yields 10.9%, One Yields 14%. Which Is Better?

Michael Foster, Investment Strategist
Updated: March 7, 2024

Closed-end funds sometimes give us hard choices … like do we want high dividends or really high dividends?

Okay, so maybe I’m being a little flippant here—but not much!

A reader got me thinking about this recently, with a question about the differences between the 10.9%-yielding Western Asset High Income Opportunities Fund (HIO) and its sister fund, the 14%-yielding Western Asset High Income Fund II (HIX).

Both are managed by the same team, are in the same asset class (high-yield bonds) and have virtually the same name. So surely they’re pretty much the same, right?

Not so fast. In reality, choosing the right CEF is part science and part art, and a deep dive into these two to determine which is, in fact, the best buy is a good way to get a handle on the process.… Read more

Finally Better Than My Mattress: Safe Bond Funds

Brett Owens, Chief Investment Strategist
Updated: March 6, 2024

Last time we spoke about safe bond funds, I recommended an unconventional alternative: my mattress.

It was June 2022. Interest rates were rising, bond prices plummeting, and we contrarians were smartly sitting on sizeable cash positions.

Thoughtful reader William wrote in asking about using short-term bond funds as “cash equivalents.” After all, wouldn’t some yield be better than no yield?

No. Short-term bond funds were no match for my mattress, which does not trade inversely with interest rates. Bond prices and interest rates are an inverse seesaw—when rates rise, bond prices fall and when rates fall, bonds rise.

Plain ol’ cash outperformed the three safe bond funds we used as cautionary examples.… Read more

Our 10%-Yielding Contrarian Play on Overdone Inflation Fears

Brett Owens, Chief Investment Strategist
Updated: March 5, 2024

Look, this worry that inflation will stick around forever is ridiculously overblown. It’s only a matter of time before it settles out.

Heck, it’s already starting to happen: Last week’s personal consumption expenditures (PCE) print for January—a fav of the Federal Reserve—tells the tale. The headline number came in at 2.8%, as expected. That’s still above the Fed’s 2% target.

But the core number of 2.4% (excluding more volatile categories like food and energy) was the lowest since February 2021.

We looked at one way to profit from overwrought fears last week: low-volatility dividend-payers like utilities and food makers. Many folks see these as “bond proxies.”… Read more

Think You Missed the AI Boom? This 10%-Payer Gets You in for 16% Off

Michael Foster, Investment Strategist
Updated: March 4, 2024

It’s undeniable that NVIDIA (NVDA) is the hottest stock out there right now.

In just five years, it’s soared nearly 2,000%. That’s over 80% annualized (!), including both the pandemic and the 2022 selloff. Most of those gains have come in the last year and a half, thanks to the AI boom.

And NVIDIA is perfectly positioned to profit from that boom, with demand for the company’s computer chips so high that it has to pick and choose buyers (NVIDIA has said it’s trying to sell the chips “fairly,” since demand has far outstripped its capacity to make them).… Read more

Earn 3x to 6x the Market’s Dividends Without Breaking a Sweat

Brett Owens, Chief Investment Strategist
Updated: March 1, 2024

I think I’ve been asked every day this week from ordinary people if I’m trading NVIDIA (NVDA).

Be careful out there, my fellow contrarian!

A sharp pullback is possible. Something has to shake the froth out of this market. When that happens, investors will look for stocks that are high on income and low on volatility. Today we’ll highlight six paying up to 8.6%.

The secret is beta, a measure of an investment’s volatility against a benchmark. For instance, usually the S&P 500.

If a stock has a beta of 1, it means it’s every bit as volatile as “the market.”… Read more

These 10% Bond Deals Are Still Around (But Their Discounts Are Closing)

Michael Foster, Investment Strategist
Updated: February 29, 2024

There is a ton of demand for bonds out there right now, and it’s easy to see why: they’re offering big income streams—especially when you buy your high-yield “corporates” through our favorite income plays: closed-end funds (CEFs).

These days, there are plenty of CEFs kicking out yields of 12% or more. Put just $10,000 in a dividend-payer like that and you’re getting $100 per month. Or you could replace the median American income of $41,261 a year with just $342,842 invested.

These days, thanks to the Fed’s rate hikes, holding bonds—and essentially becoming a lender by doing so—means a lot more cash in your pocket, since you’re essentially “lending” at rates not seen in over two decades.… Read more

A Contrarian Trade: Sell NVIDIA, Buy These Bonds

Brett Owens, Chief Investment Strategist
Updated: February 28, 2024

Many investors say they buy low and sell high. But how many really do?

Let’s pick on the people buying NVIDIA (NVDA) at atmospheric levels. First, can they even spell NVIDIA? (Hint: Two “I”s).

Second, do they realize it sports a price-to-sales (P/S) ratio of 32? It is usually a really bad idea to pay 10+ times sales for a stock. Let alone thirty-two.

Note that I did not say earnings. I said sales. Revenues. The ol’ top line. Money before everything.

Scott McNealy, the co-founder of Sun Microsystems, famously told investors it was insane to pay 10-times sales for Sun’s stock.… Read more

2 “Low-Drama” Dividends That Will Soar as Inflation Drops

Brett Owens, Chief Investment Strategist
Updated: February 27, 2024

You know what we’re gonna do about that hot January inflation print that dropped a couple weeks ago?

Ignore it.

Actually, we’re going to go one better and profit from it by grabbing stocks most folks see as “bond proxies”—solid companies whose stocks move up when rates come down.

But wait—isn’t that the opposite of what we should be doing when everyone is panicking that rates are going to stay high—and inflation is going to stick around?

Here’s the thing: Despite the noise, I don’t think that’s going to happen.

Truth be told, the panic we saw following the January CPI release looked like a mini version of last October’s freakout, when 10-year Treasury rates spiked to near 5% and worry was everywhere.… Read more