Here at Contrarian Outlook, we’ve been talking a lot about crypto lately—but not in the way you might think.
We’re not buyers—far from it! Instead, we’re using a savvy, dividend-focused strategy to set ourselves up for some nice gains (and dividend payouts!) as gamblers flee crypto and speculative tech stocks. (I’ll spotlight two closed-end funds that are aligned to scoop up our “crypto refugees” while handing us dividends yielding up to 11% in just a moment.)
I’m reminded of crypto right now because many of these “coins” have fallen hard recently—and last week, we got word of one that went essentially to zero!
Cryptocurrency Terra/Luna (these are actually two cryptocurrencies both launched by the same people) lost almost 100% of its value, with $40 billion in valuation disappearing into thin air. Investors who got in early were bragging about 100-times (and greater) returns, but those who got out too late lost their whole investment.
Now, as you can see from Coinbase and most other cryptocurrency exchanges, trading of Terra/Luna is no longer supported. That $1.6-billion market cap at which the coin is currently valued? It doesn’t exist. Because the currencies are no longer supported, and Terra has been shut down, anyone who still has one of the 6.5 trillion Luna coins in their cryptowallets will find that they can’t use them or exchange them for cash.
Build Lasting Wealth With 6%+ Yielding CEFs
Obviously, anyone who went all in on Terra/Luna isn’t someone we expect to move into CEFs—they’ve lost all their money! But many other (former) crypto and NASDAQ speculators are no doubt looking for places to park what’s left of their cash. And healthy dividends like those offered by CEFs will have a lot of appeal—especially with 8.3% inflation eating away at what they have left.
This is where the two CEFs I mentioned a second ago come in. They’re good examples of the kinds of funds that would appeal to our crypto refugees: the Liberty All-Star Equity Fund (USA) and the Gabelli Dividend & Income Fund (GDV). A couple of years ago, they were yielding 10.4% and 7.9%, respectively.
Since then, GDV’s dividend has stayed solid (it now yields 6.1%) and comes your way monthly. USA, which pays quarterly, has seen its dividend rise by nearly 30%, for an 11.1% yield.
A Pay Raise and Big Gains
These funds have also seen the value of their portfolios rise strongly since then. And while both are down from the all-time highs they hit late last year (as, it should be noted, is just about everything in the market), both are still up a solid 50% in just two years. And unlike cryptocurrencies, these funds’ assets have actually grown:
Real Growth Backed By Strong Assets
As you can see above, these funds’ liquidation values have gone up over the last couple of years, thanks to actual fundamental gains in the stock market, generated by the rising cash flows and future earnings potential of the companies these funds hold.
Speaking of their portfolios, the management teams at both of these funds have done a nice job of positioning them for the current market. USA, for example, holds Alphabet (GOOG), UnitedHealth Group (UNH) and Visa (V), three firms that have long histories of positive earnings, high margins and growth.
GDV, meanwhile, holds Microsoft (MSFT), which is profiting from growing demand for cloud services; tobacco firm Swedish Match (SWMA), whose stock has jumped on an aggressive acquisition attempt from Philip Morris (PM); and JPMorgan Chase (JPM), which profits as rising interest rates boost its loan income.
In other words, GDV and USA offer big dividends and growth potential backed by real companies making real profits by providing real goods and services. That’s about as far away from the crypto casino as you can get, and it’s a good example of how high-dividend CEFs are always a better choice than speculations, no matter how big the historical gains of said speculations might be.
Crush Inflation, Retire Well With These 8.5%+ Paying CEFs
These days, we’re all worried that inflation will devour our nest eggs. It’s the No. 1 worry I’m hearing from investors. CEFs like USA and GDV, with their high dividends, are a help. But they’re not my favorite picks for protecting your portfolio from the so-called “silent wealth killer.”
Those would be the 4 CEFs I’ll discuss here. They pay a gaudy 8.5% average yield, but the real appeal is in their discounts: these 4 funds are so cheap that I fully expect them to return 20%+ in price gains in the coming year. And if the market takes a tumble, their low valuations will help cushion the blow. And we’ll enjoy their 8.5%+ payouts either way!
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