Sayonara, SPY. And Hello, Recession-Resistant Monthly Divvies.

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Sayonara, SPY. And Hello, Recession-Resistant Monthly Divvies.

Well the “index huggers” hurled their positions quickly, didn’t they! Some bad jobs numbers. A rally in the Japanese yen. And it was sayonara, SPY.

The financial “squares” use blunt instruments. When they panic, they dump the only ETF they own. Turns out they were all short the Japanese yen heading into the weekend!

When the margin call came, they sold the only ticker they own: SPDR S&P 500 ETF Trust (SPY).

I warned you about SPY three weeks ago, just before it crashed. My problem with SPY came down to three stocks, Apple (AAPL), Nvidia (NVDA) and Microsoft (MSFT), which made up 21% of the index—and still do!… Read more

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Is There Any Reason to Hold a CEF Paying Less Than 5%?

Only here at Contrarian Outlook can we banter for an hour-plus about closed-end funds, utilities and oil dividends! This site is our sanctuary, my income friends.

I’m talking about our Contrarian Outlook 2024 Q2 VIP Webcast. Every quarter we fire up GoToWebinar and discuss the top high-yield stocks and bonds on my mind, along with your questions. A big thanks to my 1,151 subscriber friends who attended the meeting live.

On the call I fielded some questions about closed-end funds (CEFs) that we didn’t have time to cover. I said I’d read them all and, well, I did. So, let’s address them now.… Read more

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This 11.1% Dividend is a Sucker’s Bet

Closed-end funds (CEFs) are ready to climb after a two-month decline. In preparation for this pop, select vanilla investors are buying this 11.1% dividend with its 14% downside.

Wait, what?!

Everyone hates bonds today. Yet, somehow, these bonds are selling for $1.14 on the dollar.

I sure wouldn’t do it. I’d favor the fixed income that everyone hates. (More on these discounted dividends in a moment.)

Who is this “I’ll pay a premium” belle of the basic income ball? Convertible bonds. Convertibles pay regular interest. In this way, they act like bonds. You buy them and “lock in” regular coupon payments.… 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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These Tax-Free Bonds Turn a 4% Yield Into 7.5% (Here’s How)

The 10-year Treasury is storming past 1.6% yet again. Look out, high yield!

I kid because I love (income). And one-point-six just doesn’t do it for me. Plus, remember, this bounty does not 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 a nest egg (let’s use $500K) by 1.6%, we must remember that the final answer is probably not $8,000 in annual income. Because if we’re raking in income from any other sources, we should lop off a chunk of this for taxes.

Interest Received is the official IRS tax term, for my fellow tax wonks.… Read more

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No Rate Worries Here, Just Tax-Advantaged Yields Up to 7.8%

Does a rising 10-year Treasury yield mean we should move on from municipal (muni) bonds? We’ll talk muni strategy in a moment. First, let’s pay homage to these tax-efficient payers.

Munis are superior to Treasuries two ways. First, they pay more. Even with the 10-year rate popping above 1.6% earlier this week, we can double or triple our dividends with munis. The iShares National Muni Bond ETF (MUB), for example, yields 2.1%, which is 30%+ better than the still-chintzy T-Bill.

Plus, munis have tax benefits. MUB is an easy-to-buy vehicle with a tax-advantaged payout that is higher than its stated 2.1% yield.… Read more

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No Rate Worries Here, Just Tax-Advantaged Yields Up to 7.8%

Does a rising 10-year Treasury yield mean we should move on from municipal (muni) bonds? We’ll talk muni strategy in a moment. First, let’s pay homage to these tax-efficient payers.

Munis are superior to Treasuries two ways. First, they pay more. Even with the 10-year rate popping above 1.6% earlier this week, we can double or triple our dividends with munis. The iShares National Muni Bond ETF (MUB), for example, yields 2.1%, which is 30%+ better than the still-chintzy T-Bill.

Plus, munis have tax benefits. MUB is an easy-to-buy vehicle with a tax-advantaged payout that is higher than its stated 2.1% yield.… Read more

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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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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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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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