This 8% Dividend is Safe (and Trading at 7% Discount!)

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Do retirement solutions come any better than a safe 8% dividend, paid monthly?

This is what we contrarian income seekers love about the Aberdeen Asia-Pacific Income Fund (FAX). It pays 8% annually, dishes its dividend every month and, thanks to the debt situation in China, trades at a 7% discount to its net asset value (NAV)!

Last week, we pointed out a “mini-panic” buying opportunity in FAX. Its price had suffered, but you wouldn’t know it by looking at the fund’s NAV—the value of its bonds minus debt—which has barely budged over the past month:

NAV Was Steady, Pullback Was Price Only

Its price had been punished because armchair market observers fear Evergrande and the Chinese credit markets.… Read more

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The stock market goes up as well as down and, for whatever reason, it tends to swing wildly in September and October. With last Monday’s intraday price action, we saw our first 5% decline in a year.

The last time the S&P 500 fell by 5% or more was… this time last year.

Losing money isn’t fun. Then again, it is our job to make sure that paper losses stay on the page.

Historically speaking, this is a good month to go shopping. Last October, we locked in 7.3% to 10% dividends—and 51% total returns (in just 12 months!) soon followed.… Read more

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Plenty of investors will tell you that the higher an investment’s dividend yield, the greater the risk you’ll suffer a big dividend cut, especially in a market downturn.

To that I have one response: these folks have never invested in closed-end funds (CEFs)!

The portfolio of our CEF Insider service is a case in point. It yields a healthy 6.6% on average—five times more than the income-starved S&P 500 crowd gets—and the payouts on our funds have held up beautifully throughout this crisis.

Like the Eaton Vance Tax-Advantaged Global Dividend Fund (ETG), which we bought in January 2020, when it yielded a handsome 6.7%.… Read more

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If you’re making buy decisions based on the daily gyrations of the S&P 500, you’re setting yourself up for big losses—and costing yourself a shot at big dividends, too.

Why? For starters, at a 1.6% average yield, the popular names simply don’t pay enough. You’d need to save $2.5 million just to generate $40,000 in yearly dividends!

We need a better option—one that lets us save a reasonable amount of money (I’m talking $500,000 to $600,000 here) and still generate meaningful income.

I’ll give you two of my best contrarian strategies for doing that in a moment. First, let me show you why it pays to be patient right now, even though many folks are rushing to buy stocks, with the S&P 500 up 14% as I write this.… Read more

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When this closed-end fund (CEF) lowered its monthly dividend for the first time in 17 years, many income investors (understandably) panicked and sold.

Too bad for them. They missed out on 27% returns over the next 20 months.

Can a dividend cut actually be a good thing? Like life itself, it’s complicated—but my short answer is “yes.” Here’s when (and why).

CEFs are the exception to the “dividend cuts are bad” rule. In CEF-Land, payouts are taken from a fund’s portfolio, which is represented by a fund’s net asset value (NAV). Sure, the funds that we buy generally have income streams that are supposed to “power” NAV higher.… Read more

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“Brett, how you hanging in there?” My CPA leaned into his computer on our latest Zoom call.

“Well, every time Gavin Newsom talks, my life seems to get a bit worse.” (The governor of California had just announced that public and private schools would not open in the fall.)

He cracked up. “That comment reminds me of a column you wrote years ago about (then Fed Chair) Janet Yellen. Something about Yellen yapping and closed-end funds (CEFs) rising?”

“Right. Poor Janet. She sure was level-headed compared to (current Fed Chair) Jay Powell. Every time Powell speaks, gold pops!”

The reason is obvious.… Read more

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The way most folks invest, they’ll need way more than a million bucks to retire—in fact, they’ll need almost double that!

No wonder so many people throw up their hands and commit to working till they’re 100. Maybe you’re one of these frustrated souls. With the world in the state it’s in today, I can’t blame you.

But what if I told you that you could retire on a lot less? Like 75% less.

That’s right: a fully paid-for retirement on just a $437,500 nest egg. Save up that much and you can look forward to a steady $35,000 in dividends (which is right around the average personal income in the US) year in and year out.… Read more

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If you’re making buy decisions based on the daily gyrations of the S&P 500, you’re setting yourself up for big losses—and costing yourself a shot at big dividends, too.

Why? For starters, at a 2% average yield, the popular names simply don’t pay enough. You’d need to save $2 million just to generate $40,000 in yearly dividends. And let’s be honest: if you have that much cash, you may as well just live on your $2 mil—and forget about dividends entirely!

The rest of us need a better option—one that lets us save a reasonable amount of money (I’m talking $500,000 to $600,000 here) and still generate meaningful income.… Read more

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I hope you are taking care of yourself, and your family. This is a good time to hunker down, both in life and in our investing strategy. Brighter days are ahead—let’s make sure we get there with ourselves and our portfolios relatively intact.

On the other side of this pandemic and shutdown, we may eventually be presented with a “March 2009” type of buying opportunity. Big yields for dimes on the dollar. When the time is right, we’ll load up our income portfolios with these bargains and resume our usual light banter in this weekly missive.

Unfortunately, I don’t think we’re on the other side of this just yet.… Read more

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I hope you are taking care of yourself, and your family. This is a good time to hunker down, both in life and in our investing strategy. Brighter days are ahead—let’s make sure we get there with ourselves and our portfolios relatively intact.

On the other side of this pandemic and shutdown, we may eventually be presented with a “March 2009” type of buying opportunity. Big yields for dimes on the dollar. When the time is right, we’ll load up our income portfolios with these bargains and resume our usual light banter in this weekly missive.

Unfortunately, I don’t think we’re on the other side of this just yet.… Read more

Read More

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