CEF Smackdown: 2 Tax-Free Dividend Payers Face Off. Which Is Best?

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CEF Smackdown: 2 Tax-Free Dividend Payers Face Off. Which Is Best?

CEFs are renowned (by the few people who know about these high-income funds, of course!) for their outsized dividends—around 8%, on average, across the board as I write this.

But buying a CEF is not like buying a regular stock. When it comes to picking CEFs, we’ve got a whole bunch of different factors sitting in front of us that we need to weigh.

Sometimes CEFs Are Cheap for a Reason

There are, for example, some things that go beyond, say, past performance or discounts to net asset value (NAV, or the value of a fund’s portfolio—the main measure of a CEF’s value).… Read more

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These 9% Dividends Are Usually “Millionaires Only.” No More.

It’s Tax Day—the perfect time to talk about one of our favorite income plays: municipal bonds.

Don’t listen to anyone who tells you “munis” are boring. They’re anything but: It’s easy to grab 5%+ yields from them. And because munis’ income is tax-free for most Americans, that 5% is worth more—in some cases a lot more—to us.

They’re stable, too. Consider how much better you’d have slept at night if you held munis during the 2022 nightmare, when they held up much better than stocks:

2022 Put Muni Bonds’ “Crash Resistance” on Display

Truth is, yearly declines of any sort are unusual for munis, which tend to deliver 5% to 6% annual total returns in the long run—and that’s before their tax benefits, which are, quite frankly, game-changing.… Read more

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These 9% Dividends Are Usually “Millionaires Only.” No More.

It’s Tax Day—the perfect time to talk about one of our favorite income plays: municipal bonds.

Don’t listen to anyone who tells you “munis” are boring. They’re anything but: It’s easy to grab 5%+ yields from them. And because munis’ income is tax-free for most Americans, that 5% is worth more—in some cases a lot more—to us.

They’re stable, too. Consider how much better you’d have slept at night if you held munis during the 2022 nightmare, when they held up much better than stocks:

2022 Put Muni Bonds’ “Crash Resistance” on Display

Truth is, yearly declines of any sort are unusual for munis, which tend to deliver 5% to 6% annual total returns in the long run—and that’s before their tax benefits, which are, quite frankly, game-changing.… Read more

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Big Payouts, Lousy Returns: Avoid These Funds (Yielding Up to 8.9%) in ’24

Here’s the thing about high-yield closed-end funds (CEFs): sometimes a CEF will seem to have all the earmarks of a terrific investment: high (and monthly) dividends, reasonable fees and reputable management. But it’ll still come up short.

We, of course, love CEFs and see them as the critical pieces of our income portfolios. The portfolio of my CEF Insider service, for example, holds plenty of top-quality buys and yields 9% as I write this.

But when picking these funds, we need to make sure we don’t let a big name, high yield or so-called “low” fees dominate our thinking. We also need to look deeper, at factors like past performance and even management’s track record with its other funds.… Read more

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My Advice: Buy This 4.6% Tax-Free Dividend as Powell Hits Pause

There’s a crop of outsized dividends out there that are absurdly underpriced—I’m talking 14%-off discounts here. And our opportunity to pounce has arrived.

I’m talking about municipal bonds, which, like corporate bonds, look set to bounce as the economy slows and interest rates top out—then start to move lower. As rates ease off, bond yields will dip, putting a lift under bond prices (as yields and prices move in opposite directions).

The upshot? AI-powered NASDAQ stocks will lose their luster, and bonds and bond proxies—including utilities and “munis”—will likely be the darlings of 2024.

Heck, even a modest decline in rates would be enough to boost these assets.… Read more

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3 Cheap (and Tax-Free) Dividends That Love Debt-Ceiling Drama

Few folks realize it, but there’s a great place to invest our money to profit from “DC drama” like the debt-ceiling fiasco. It’s literally hiding in plain sight.

I’m talking, oddly enough, about government debt! But not federal-government debt. Instead we’re going to bypass DC and go with municipal bonds, which are issued by sleepier (in a good way!) state and local governments to pay for infrastructure projects.

Because here’s what most folks don’t realize: “munis” do great when political shenanigans abound in DC. To see what I mean, think back to 2011, another period when a Republican House and a Democratic president scrapped over the debt ceiling.… Read more

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How to Tap the SVB Mess for Big Payouts (up to 8.2%)

There’s a “delayed reaction” dividend play (for tax-free 5% yields) waiting for us in municipal bonds right now—and it’s not going to last.

I know, I know. “Munis” don’t exactly get most folks’ hearts racing. But the fact that this corner of the market tends to lag behind stocks, bonds and the rest is exactly what’s behind our opportunity here.

Plus, we get to buy cheap and get our dividends monthly when we buy our munis through a closed-end fund (CEF). That’s because most muni CEFs pay monthly—including a 5.3% payer called the Nuveen Municipal High Income Opportunity Fund (NMZ), the particulars of which we’ll delve into below.… Read more

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3 Bargain Funds Yielding 7.5%+ (Perfect for 2023)

We’ve got plenty of high-quality dividends on the table as we roll into 2023. Some of the best? Closed-end funds (CEFs) yielding north of 7.5%. Three specific names and tickers are coming up for you below.

I mention quality because if 2022 has showed us anything, it’s that quality matters: crypto and profitless tech got clobbered this year, and that was no one-off. With interest rates rising, these gambles—I say “gambles” because buying these was always more like a trip to the slot machines than investing—are likely down for the count.

You can see this in the performance of the NASDAQ 100, which is down some 28% year to date, as well-run, high-cash-flow companies like Apple (AAPL) and Microsoft (MSFT) were dragged down by basket cases like Meta Platforms (META) and its money-bleeding investments in the metaverse.… Read more

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Start 2023 With These Tax-Free Dividends (Yielding Up to 9%)

What if I told you there was a way for you to get a steady 9% dividend tax-free?

My guess is you’d be interested, especially after the tough year we’ve endured. Sure, 2023 is looking better, but no one knows what’s coming our way when it comes to inflation and rates, so more volatility is pretty much guaranteed. So a steady payout, especially sans taxes, could be the perfect fit for your portfolio.

Many investors’ response to the past year has been to go to cash. And while that may help avoid losses, it also puts you in the path of inflation running near 8%.… Read more

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This “Billionaire’s Choice” 5.4% Dividend Is the Perfect Buy for 2023 (and Beyond)

Municipal bonds are too often ignored by investors. Which is a huge missed dividend opportunity.

It’s too bad, because billionaires have been using “munis” to anchor their portfolios for years. And with good reason: as we’ll see in a second, munis can perform well when rates rise. They also pay a high “hidden” yield that beats anything you’d get on a Treasury—and most stocks.

“Munis” Offer Safe, High—and Tax-Free—Yields

I say munis’ yields are “hidden” because they’re tax-free. If you’re in a high tax bracket, I probably don’t have to tell you how valuable a tax-free yield is, but the numbers here are very compelling.… Read more

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