22 dividend funds with a yield of up to 36.5%


With 2022 likely to be a wild ride, we as income investors are going to build on two key benefits. In doing so, we will get dividends of 7% no matter what the markets at large do.

First, we can secure that “head start” on January 1 by buying funds that earn 7% on average. And these aren’t risky payments, by the way. I’m talking about secure dividends funded by real cash flow.

And second, we can buy them in the trash for as little as 90 or 95 cents on the dollar! It’s better than most investors, who pay full price (or more!) For their stocks. Ouch.

We won’t find these deals — or really any discounts – in popular actions at the moment. Fortunately, we have the opportunity to grab little-known tickers that represent the best dividend vehicles on the planet.

The closed fund, or CEF for short.

Most mutual funds and ETFs return between 1% and 3%, give or take. Even at the high end, we’re talking about an annual income of just $ 30,000 – and that’s if we have at least a million dollars to play with.

CEFs pay more. And when we buy them at a discount, they charge less! CEFs often pay 7% or more. It makes a big difference when it comes to million dollar retirement income:

The only funds we can buy on sale

There is no overestimation of the earning potential of CEFs, but they are one step ahead of their more popular cousins:

We can get them at a reduced price.

Unlike mutual funds and ETFs, closed-end funds have a limited number of shares. This means that when markets panic, they can (and often do) trade at a discount to their net asset value (NAV). Consider a fund that trades at a 5% discount to net asset value: this means that we are effectively buying all of the stocks and / or bonds inside for 95 cents on the dollar!

Think about it: not only can we benefit from the inherent growth in the fund’s holdings, but we can also benefit from additional added value, just like we would with an undervalued stock, and a dividend yield. high to boot!

So, let’s get ready to take some game-changing action that will put us on the right foot not just for 2022, but well beyond. Let’s take a quick look at 22 CEFs that offer returns of at least 5.4% but up to an astonishing 36.5%, and trade for less than the value of their assets.

US equities: go beyond the core index fund

Instead of investing, say, in an S&P 500 tracking fund or an industry ETF like the SPDR Technology Select Sector Fund (XLK)

XLK
Where Vanguard Real Estate ETF (VNQ)

VNQ
, we can do the same through the CEFs and multiply our income by several times.

Take BlackRock Science and Technology Trust (BST), for example. This CEF is distinguished in part by a stellar payout that earns almost 6% at current prices. But another part of the appeal is how BST is handled.

Like just about every other CEF, this is an actively managed fund whose portfolio generally resembles a broad technology offering. Its 125 farms include Apple

AAPL
(AAPL)
, Microsoft (MSFT

MSFT
)
, Marvell technology

MRVL
y (MRVL)
and the Dutch crisps company ASML (ASML). But BlackRock Science and Technology Trust may also (and invest) some of its assets in private placements – companies that we simply cannot currently access through a core index fund.

In addition to this, BST implements options strategies, using covered calls to help reduce volatility and generate income.

Fixed income: these bonds aren’t boring

Closed-end funds are also a fantastic way to gain exposure to fixed income, especially in a low rate environment like this.

the IShares JP Morgan EM High Yield Bond ETF (EMHY)

EMHY
is one of the most aggressive bond ETFs I can think of. This fund combines junk debt and emerging markets such as Turkey and Mexico, and earns a big yield of 5.8%.

We can do better with FEC. In fact, we can get the same kind of return from tax-free municipal bonds, and even more income once we get into junk and convertible funds.

Consider the Nuveen Improved Municipal Value (VNE). This fund holds around 260 municipal issues, ranging from health system tax obligations to general debt. Credit is quite commonplace: nearly 80% of its portfolio is investment grade, so it does not sacrifice quality to provide large income.

However, unlike an ETF or mutual fund, Nuveen’s NEV can use leverage. The fund currently has 33% leverage, which allows management to put even more money into working on their best choices.

And most of that 5.8% return – paid monthly, no less – is bond income, which means it’s exempt from federal tax obligations. If we are in the top tax bracket, we get a tax return of 9.2%!

The Oddballs: Alternative Strategies

This penultimate CEF cluster is made up of two groups of funds: covered buying strategies and “allocation” funds (read: equities and bonds together).

Nuveen S&P 500 dynamic crush (SPXX), for example, invests in about 300 S&P 500 stocks to somewhat mimic the performance of the index. He then writes covered calls against his equity holdings to smooth performance and generate more income. It’s a way to get Meta-platforms (FB) and Alphabet (GOOGL) to pay us 5.4%!

Tax Advantageous Dividend Income (EVT) Eaton Vance, meanwhile, is a “boxed wallet”. The asset mix currently includes 75% U.S. equities, but also 8% investment grade debt, 7% preferred securities, 6% blue chip bonds and pinches of foreign stocks, convertible debt securities and cash. And incredibly, this diverse portfolio still earns almost 7%.

International funds: ignore them if you hate money

Many investors tend to overlook foreign funds, and I understand why: US stocks have been the best performers for years on average. But in doing so, we are missing some overseas moonshots!

Templeton Dragon (TDF) and The Indian Fund (IFN), which invest in Chinese and Indian stocks respectively, are currently posting outsized returns of 36.5% and 11.5%. And while it’s historically high for both, single-digit and double-digit returns are quite the norm.

All the credit here goes to the fund managers, who have proven for years that for certain categories of investments, it is more profitable to pay specialists than to settle for income funds.

Brett Owens is Chief Investment Strategist for Contrasting perspectives. For more great income ideas, get your free copy of his latest special report: Your early retirement portfolio: 7% dividends every month forever.

Disclosure: none

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