This Secret Will Help You Crush the Market, Grab 7% Dividends in 2021

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This Secret Will Help You Crush the Market, Grab 7% Dividends in 2021

Don’t listen to the index-fund crowd: it is possible to beat the market year in and year out—and you can do it while grabbing big 7%+ dividends, too!

There are three steps to pulling off this feat:

  1. Go with a high-yield closed-end fund (CEF): many of these funds return more than their benchmarks on the regular! AND because they pay 7% dividends, on average, you get a large portion of your gain in cash!
  2. Look beyond stocks: Other markets, like corporate bonds and municipal bonds, are far less “democratic” than the stock market: in other words, the big players get the pick of the crop!

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These Tax Haven Bonds Pay 7.7% for Top Bracket Ballers

The yield on the 10-year Treasury is exhausted after its epic run to nearly 1.2%. It’s due for a breather.

Anyone who buys the long bond today can still “lock in” a 1.1% yield. But remember, this bounty won’t escape the tax man. Any interest income we earn from Treasuries—no matter how sad—is subject to federal and state taxes.

So, if we’re multiplying your nest egg (let’s use $500K) by 1.1%, we must remember that the final answer is probably not $5,500 in annual income. Because if we’re raking in income from any other sources, we should lop off a chunk of this for taxes.… Read more

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The 1 Investment That Boosts Your Dividends Without Boosting Your Taxes

Now that the Democrats control the House, Senate and the White House, you’re probably wondering what the new administration means for your tax bill—and your portfolio.

There’s good news here, and it comes in two parts: first, the tax hit likely won’t be as much as you think (if you notice it at all!). And second, Biden’s tax plan has quietly boosted the municipal-bond market, where there are scores of tax-free dividends waiting for us. And it’ll likely boost it even more in the months ahead.

First Up, Your Tax Bill

The takeaway is that, while there are some changes in the tax code in Biden’s latest plan, taxes will remain lower than they were when President Trump first took office.… Read more

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These “Stealth” 5% Dividends Are Really 8.3% (Surprising Tax-Free Secret)

The disaster that was 2020 is finally out of our hair, though there could be one silver lining if you followed a contrarian investing approach in 2020: serious gains in your stock portfolio.

But, of course, those gains come with a big consequence: Uncle Sam will be coming for his share on Tax Day in April. And to be honest, we don’t have much leeway to cut our 2020 tax bill at this point. But there is one canny move we can make to (legally, of course!) reduce our tax burden in April of next year: buy municipal bonds.

What Everyone Gets Wrong About Municipal Bonds

Sure, municipal bonds (issued by cities and states to fund local infrastructure) seem like a pretty boring option when there are corners of the stock market (I’m looking at you, tech) that jumped 40%+ last year.… Read more

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This 8% Dividend Is 10% Off (Thank Steve Mnuchin)

Something shocking just happened: Treasury Secretary Steven Mnuchin cut off a $454-billion program the Federal Reserve uses to keep the bond market running.

A disaster, right?

You’d think so. After all, we’ve heard time and time again that the Fed will do whatever it takes to support the bond market through the crisis. Now a big source of cash needed to do that is gone.

The bond market’s response was even more surprising: crickets.

The junk bond–tracking SPDR Bloomberg Barclays High Yield Bond ETF (JNK) and iShares National Muni Bond ETF (MUB) held on to post-election gains after Mnuchin’s decision was announced.… Read more

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This 5.3% Dividend Is Really 8.4%. Here’s How.

They’re here again: more articles warning us of the “dangers” of municipal bonds. Don’t take the bait, because these wrongheaded articles will steer you away from some of the safest (and highest) dividends out there.

One claim you’ll read in many of these pieces is that states are losing tax revenue, which could mean they’re gong to default on their debt or go bankrupt. In reality, municipal-bond bankruptcies are really rare.

And I mean really rare: since 1970, the municipal-bond default rate has been 0.0043%, according to Moody’s Investor Services. To put that in perspective, the CDC says your chance of getting hit by lightning is 0.0002%.… Read more

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Must Read: These 5% Dividends Are Really 6.9% Payouts in Disguise

Have you read the latest? The media says municipal bonds, our favorite plays for safe, tax-free dividends, are facing a surge in defaults.

That, of course, sounds like terrible news for “munis,” which are issued by local governments to fund infrastructure. Munis’ government backing is a big reason why their default rates are microscopic: typically around 0.01%.

So are our rich, tax-free dividends really about to be stolen away by a wave of defaults? No way! In fact, now is a great time for us contrarians to move into these stout dividend plays.

And when you buy your munis through another income favorite of mine, closed-end funds (CEFs), you get something truly special: 5% yields that, due to their tax-free-nature, work out to much more: if you make, say, $150,000 a year, your “true” payout on a 5% muni-CEF is a sky-high 6.9%.… Read more

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Trade-In Lame 0.5% Bonds for Secure Yields Up to 7.5%

Historically speaking, it’s best to avoid bonds when your central bank is printing money like crazy. More cash can lead to inflation, which can lead to higher interest rates—and put a damper on any fixed-rate holdings.

But not all bonds are bad ideas. Some have their coupons tick higher with rates. Others can even provide you with the upside of a stock! Let’s review US-centric fixed income, starting with the “outhouse” and working our way up to the “penthouse” quality bonds paying as much as 8% today.

US Treasuries: For 0.5%, Why?

Ten-year Treasuries pay just 0.5% or so as I write.… Read more

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Swap Your “Dead Money” ETFs for These 7%+ Payouts

I don’t know why you’d try to cobble together an income stream with miserly ETFs when there are plenty of closed-end funds (CEFs) trading at big discounts, even after the huge market rebound we’ve seen since March.

What’s more, many of these CEFs are throwing off life-changing 7%+ payouts!

Why are we seeing some great deals in CEFs now? Because the folks who invest in these funds tend to be slower to react to events than the jumpy crowd holding the typical S&P 500 stock. That lag gives us a nice opportunity to buy while these funds’ prices are still deeply discounted from the value of the assets in their portfolios (a figure known as the net asset value, or NAV).… Read more

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My Crisis-Investing Strategy for 7.1% Yearly Dividends (forever)

This crisis has hit income-seekers—particularly retirees—hard. After the stomach-churning March selloff came the slashing of “sacred cow” dividends, like those of senior-care providers Ventas (VTR) and Welltower (WELL).

Look to Closed-End Funds for Retirement Income

It’s understandable (and healthy!) if the past few months have made you extra cautious when picking dividend stocks. The good news on the dividend front is that you can still find plenty of high, safe payouts in my favorite corner of the high-yield market: closed-end funds (CEFs).

CEFs are a great pick for retirement income today, for three reasons. First, they still give you access to large-cap stocks you know well: mainstays like Visa (V), Apple (AAPL) and Johnson & Johnson (JNJ) feature in many equity-CEF portfolios.… Read more

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