This Media-Driven Panic Has Put Our Favorite 7%+ Yielders on Sale

The Contrary Investing Report

Investing and Trading News, with a Contrarian, Sarcastic Twist!

Don’t believe the media’s latest line that stocks—and by extension 7%+ yielding closed-end funds (CEFs)—are oversold.

Far from it!

Truth is, stocks—and bonds and real estate, for that matter—are still oversold as a result of the 2022 market crash.

You can see that in action in the chart below, with the benchmark ETF for the S&P 500 (in purple) up 11.1% since the start of 2022, while corporate bonds (in orange) are basically flat. And real estate investment trusts (REITs)—in blue—are still in the tank, down about 16%.

Don’t Believe the Hype: All Our Favorite Assets Are Still Cheap

Fact is, those are all low numbers, even for stocks: the S&P 500 is up an annualized 5.4% over the last two years and change since the start of 2022, which marked the beginning of the market’s swan dive.… Read more

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Bonds are back, baby. Let’s talk about three funds that pay—between 8.3% and 10.9%.

Plus, they are trading for less than the fair value of their parts. It’s free lunch time in Bondland.

Of course not all bond funds are created equal. ETFs serve their purpose, but closed-end funds (CEFs) are where the payout party is at. Value plus yield at the CEF café.

Most ETFs are tied to an index. Which means they are run by rules and robots. Boring.

CEFs tend to be actively managed, meaning “bond brains” are able to adjust their portfolio from defensive to offensive as the investing environment shifts.… Read more

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Closed-end funds (CEFs) are incredible wealth generators, combining huge (8%+, in many cases) dividends, with the potential for stock-like price gains.

But to make the most of them, you need to look at one essential indicator: the discount to net asset value (NAV, or the value of the fund’s underlying portfolio).

We don’t have to go too far into the weeds here: it’s just another way of saying that CEFs can, and often do, trade for less than their portfolios are actually worth.

That makes our approach straightforward: Buy when a CEF trades at an unusually deep discount—then ride along as that discount dissipates, driving the price higher as it does.… Read more

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“Daddy,” My nine-year-old started. I knew exactly what she was about to say.

“They said a lot of bad words.”

We were strolling out of Golden 1 Center. Our playoff-hopeful Sacramento Kings had just dropped another home game to a losing team. Our fellow fans were in foul moods.

Their postgame language was, shall we say, colorful. I thanked my daughter for her observation, and we continued our stroll away from the salty crowd. Best to get some distance before calling an Uber.

(A reformed dad like me couldn’t lecture our neighboring group with any real credibility. I mean, please don’t rewind my personal postgame tape to my time as a twenty-something.… Read more

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AI stocks are booming—but they’re an absolute “dividend desert” for us contrarian income-seekers.

Or are they?

Most tech stocks—and I’d put AI darling NVIDIA (NVDA), with its pathetic 0.02% yield, at the top of the list here—don’t pay dividends when they’re growing quickly.

Only later, when growth slows, do they “find religion” and return cash to shareholders as dividends and buybacks. That’s too bad for those of us who like to have more than one way—price gains—to book returns on our stocks.

But what if we could find a way to grab more of our AI profits as dividends—particularly growing dividends—so we don’t have to “buy and hope” for price gains alone?… Read more

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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

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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

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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

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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

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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

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