Tap Into A 7% Yield at a 20% Discount in This Overlooked CEF

Jeff Reeves, Senior Investment Analyst
Updated: April 29, 2022

Personally, I am not a fan of Beyond Meat or any of those fake burgers that are out there. But after a recent trip to the grocery store to buy provisions for a backyard barbecue… the sticker shock alone may turn me into a believer. Ground beef is now up to more than $5 a pound!

I guess I shouldn’t be surprised. Many folks are getting used to paying more amid the red-hot inflation we’re seeing across gasoline, groceries, and just about everything else.

But I am a cheapskate at heart, who refuses to pay more than I have to for anything.

That frugal mentality also comes through in my approach to investing, too. I don’t chase overpriced stocks, and I refuse to bankroll overpriced money managers who eat away at my savings with their fees.

If you’re a cost-conscious investor like me, then you’ll be thrilled to hear about one corner of the market that is still offering substantial bargains right now.

With a little research and planning, you can tap into tremendous yields that are more than 4X that of the typical S&P 500 dividend stock…

… and exploit market dynamics to lock in as much as a 20% discount in the process!

Tap into MLPs on the Cheap with This Top Closed-End Fund

The strategy I’m talking about involves closed-end funds (CEFs).

Traditional mutual funds or modern ETFs are “open-ended,” in that they issue new shares and therefore adjust their value rigidly to reflect current assets under management. However, closed-end funds have a fixed number of shares, with no new shares created as new investors come around and no existing shares redeemed as investors exit.

This unique dynamic means that shares in a closed-end fund sometimes don’t reflect true supply and demand dynamics – at least, not for long.

But if you’re one of the savvy investors who can identify these discrepancies, you can snag a massive discount – supercharging your yield and deploying less capital in the process!

Let’s look at one of my favorite energy-focused closed-end funds right now—the ClearBridge MLP & Midstream Total Return Fund (CTR). As the name implies, this is a fund comprised of energy pipeline, storage and transportation companies. These businesses are a bit more insulated from oil and gas price volatility, and can offer much more reliable dividends as a result.

Right now, based on its most recent quarterly distribution declaration of 52 cents, payable on May 23, the CTR fund yields 7.1% at current pricing. What’s more, the forthcoming 52-cent payday is up from 43 cents in February and 40 cents at the end of 2020.

CTR’s Dividend on the Rise

That income level is an impressive enough selling point. But what’s really great about the ClearBridge MLP fund is that it currently trades for a nearly 20% discount to its assets.

Many investors have been interested in midstream energy stocks lately because of high oil and gas prices and the generous dividends this sector offers. But with this closed-end fund, you get to tap into this asset class at bargain prices.

What’s not to love?

A 7%+ Yield for 80 Cents on the Dollar

CTR shows the power of shopping around for the best CEFs. But what if I told you there are funds that offer even bigger yield – and potentially, even greater upside for shares?

The ClearBridge MLP fund I highlighted here is just one bargain opportunity in the arena of closed-end funds. There are CEFs focused on REITs and real estate. There are CEFs that play utilities. There are even CEFs with a technology flavor out there if you want to get growth along with your income!

Not all CEFs are worth your time, however. Because of pricing dynamics, some actually trade at significant premiums to their assets right now. So it’s crucial to understand what you’re buying—and at what price.

Thankfully, we at Contrarian Outlook take the guesswork out of the equation for you. We know how to identify “triple threat” CEFs that will deliver thanks to:

  1. Attractive pricing, with current discounts to net assets
  2. Future upside, with a goal of double-digit returns
  3. Steady income, with yields of 6%, 7%—or more!—often paid monthly.

Thanks to the recent selloff in 2022, there are a handful of incredibly attractive but incredibly cheap high-yield CEFs out there.

These best-in-class CEFs are an important part of the Contrarian Income Report’s strategy. Aiming to generate 7%+ yield via steady dividends, our model portfolio can deliver more than $3,000 in reliable distributions—each and every month!

And right now you can get a risk-free special report that offers some of our favorite CEFs on Wall Street. All are trading at double-digit discounts to NAV today and all are great illustrations of how you can tap into tremendous income potential.

Check out our latest briefing on how to retire on 7%+ monthly dividends—and how closed-end funds are one of the tools that can help build your portfolio.