There’s a way for us dividend investors to tap the news of a COVID-19 vaccine for huge payouts of 10% and up. And we’ll position our portfolios for serious price upside, too.
I know the vaccine news has a bit of a “horse is out of the barn” feel to it. After all, the market and shares of the vaccine’s producer, Pfizer (PFE), have already popped (though the rally has taken a bit of a breather lately). But you’re not too late. With the three investments I’ll show you below, you could grab healthcare dividends much bigger than the 3.9% Pfizer pays now.
A Fast Gain for the Vaccine Manufacturer
Let me say upfront that Pfizer is a great stock; I’ve been recommending funds that hold it to members of my CEF Insider service for years. And it’s still well-priced, trading below its January highs, despite its recent jump. But I don’t see why you’d buy it now when there are ways to get Pfizer and other stocks profiting from the COVID-19 fight and grab dividends up to 9.4%, too.
The key is to not buy shares “direct” but instead do so through closed-end funds (CEFs). Like ETFs and mutual funds, CEFs invest in a variety of assets and pass the profits to you. They’re also bought and sold every day on an exchange. But unlike ETFs, CEFs pay huge dividends.
While the benchmark healthcare ETF, the Health Care Select Sector SPDR ETF (XLV), yields 1.4% today, the average CEF yields a whopping 7.4%. And there are a handful of healthcare CEFs yielding even more.
Today we’ll look at three CEFs that let you ride the vaccine train and get a huge income stream (at a big discount, in the case of one fund) at the same time.
Healthcare CEF Pick No. 1: This Well-Known Powerhouse Delivers Cash Monthly
You no doubt know of BlackRock. The New Jersey–based asset manager is the biggest player in finance, with over $7 trillion under management. Its BlackRock Health Sciences Trust (BME) is a small part of that pie, with $508 million of assets, but it’s big enough to make waves in the healthcare market. BME is well-diversified between drug makers, medical-supply providers and health insurers.
Source: BlackRock
This fund gets you into this sector without the concentration risk of buying a single stock. The best part is that BME yields 5.2% and has consistently paid that yield for more than five years.
Healthcare CEF Pick No. 2: A Small Fund With a Huge 9.4% Payout
BlackRock’s fund is great at what it does, but there’s a small CEF manager, Tekla Capital Management, that’s interesting because it only invests in healthcare. Tekla employs medical experts, bioengineers and Ivy League financiers to identify the right companies to buy at the right times. Their Tekla World Healthcare Fund (THW) is worth a look for this reason alone, but also because its global perspective gives it worldwide diversification. Pfizer is a top holding.
Source: Tekla Capital Management
THW has another thing going for it: dividends, and a lot of them. With a 9.4% yield, it provides a massive income stream that’s an attractive lure to investors in a world where the typical S&P 500 stock pays less than 2%. Like BME, this fund doles out cash monthly, making it a great vehicle for income, in addition to its exposure to the healthcare companies likely to get more interest in a post-pandemic world that desperately wants to avoid a repeat of 2020.
Healthcare CEF Pick No. 3: The Bargain Hunter’s Delight
THW is great, but there’s a Tekla fund that’s even better: the Tekla Healthcare Opportunities Fund (THQ). Its dividend is a bit lower: 8% instead of THW’s near-double-digit yield—but there’s a nice side benefit: its price. While THW trades at a small premium to its net asset value (NAV, or the value of its underlying portfolio), THQ trades for 10% less than its portfolio is worth.
A Discount … for Now
As you can see, THQ and THW were trading at nearly the same discount to net asset value (NAV, or the value of the stocks in its portfolio) earlier this year, but investors have paid more attention to THW, making that fund’s discount flip to a premium, while mostly ignoring THQ.
There’s not much reason for this, except for THW’s yield. As you can see, THQ’s portfolio isn’t much different than that of THW, and the same people manage both funds.
Source: Tekla Capital Management
This is a clear opportunity: you could buy THQ now that it’s trading at a 10% discount, hold it until it trades at the premium THW gets, then sell for a handsome profit. And while you’re waiting, you’ll collect your rich monthly dividends from THQ.
Yours Now: My Top 5 CEFs for SAFE 8% Dividends, Fast Post-Election Gains
Buying CEFs at a big discount to NAV, then holding on as that discount bubbles away (generating quick price upside as it does!), is easily the most exciting thing about investing in CEFs.
And while you’re waiting, you’ll be quietly pocketing dividends bigger than anything else you’ll find in the market.
S&P 500 stocks? Their 1.7% average payout can’t hold a candle to the massive dividends you get from CEFs. Treasuries, which yield around 0.8% today, are even worse!
Which brings me to the 5 other CEFs I need to share with you now. They’re my very best picks, paying a safe 8% dividend between them. Plus, my proven CEF-picking system has them pegged for fast double-digit price upside from here, thanks to their totally bizarre discounts.
I’m talking 20% gains in the next 12 months, to go along with your rich 8% dividend payouts!
I’m ready to share full details on these 5 undervalued income plays with you now. Go right here and you’ll get everything I have on them: names, ticker symbols, complete dividend histories and more.
Recent Comments