Warning: This 14% Dividend Fails ALL of My Safety Checks

Our Archive

Search completed

The Contrary Investing Report > NYSE:PGP

If you’re like most folks, you likely at least take a second look when you run into a big dividend yield, like, say, 14%.

Think about that for a second: drop, say, $100K into a fund like that and just seven years later, you’d have collected enough in dividends to recoup your entire initial stake.

Everything else is gravy!

But when we come across a dividend that big, we need to do a second-level analysis to make sure it’s sustainable. And that brings me to the closed-end fund (CEF) I want to tell you about today—it gives us that 14% yield but misses the mark on just about every factor you could imagine, giving us:

  • Impossibly high management fees
  • A portfolio that underperforms the market
  • An overpriced valuation, and …
  • Its profits are falling short of payouts.

Read more

Read More

In February, I wrote this about the PIMCO Global Stocks+ and Income Fund (PGP):

“If you have PGP in your portfolio, this is the time to ditch it.”

Then in early April, this happened:

Warning Becomes Reality

What was behind this nosedive? A whopping 23% dividend cut! Worse, PGP owners who didn’t heed my sell call are now sitting on 11% price losses from the day the cuts were announced.

How did I know this calamity was coming?

When it comes to high-yielding CEFs, there are three warning signs that tell you a big crash is just around the corner, and each one was blaring before PGP’s drop.… Read more

Read More

The 2019 rebound has done a lot to revive most people’s portfolios. But there’s a new trap you need to dodge as the market ticks up: the risk you’ll stumble into an overbought stock (or fund).

But don’t take that to mean stocks are pricey—far from it! The S&P 500 is barely up from the start of 2018 and still far from its all-time highs, which is ridiculous when you consider last year’s near-20% earnings growth.

So it’s pretty easy to see that stocks are still ripe for buying.

But there is one sector I am worried about—and it brings me to the first of 3 closed-end funds (CEFs) I want to warn you about today.… Read more

Read More

The 2019 rebound has done a lot to revive most people’s portfolios. But there’s a new trap you need to dodge as the market ticks up: the risk you’ll stumble into an overbought stock (or fund).

But don’t take that to mean stocks are pricey—far from it! The S&P 500 is barely up from the start of 2018 and still far from its all-time highs, which is ridiculous when you consider last year’s near-20% earnings growth.

So it’s pretty easy to see that stocks are still ripe for buying.

But there is one sector I am worried about—and it brings me to the first of 3 closed-end funds (CEFs) I want to warn you about today.… Read more

Read More

Since launching my CEF Insider service in early 2018, the picks I’ve given subscribers have outperformed the broader CEF market. That’s prompted a lot of people to ask me how I choose the CEFs I do—especially in a market as wild as the one we’ve seen in the last couple months.

My process is both complicated and straightforward. I have a checklist of 52 points I go through to choose the right fund. I apply these one by one, first using some of the broader points to screen funds, then zooming in closer, using more complex analysis to bring you my very best buys.… Read more

Read More

Today I’m going to show you a quick trade you can repeat over and over for an 8% gain in just over 2 months (or 40% annualized!).

How do I know?

Because this is exactly what happened with the PIMCO Global StocksPlus & Income Fund (PGP), which I urged Contrarian Outlook readers to buy in June and then sell in August.

A Fast, Easy Gain

So how was this win so easy to call the last time around, and how can we ride PGP and other funds to the same—and even bigger—gains in the future?

Let’s start at the beginning.… Read more

Read More

Certain closed-end fund (CEF) investors are getting a little desperate for dividends. It’s tough to blame them for reaching for 5%, 6% and even 7%+ yields in a 2% to 3% world.

But by grossly overpaying for funds, they are risking too much capital to bank these payouts. If you own any of the five popular funds I’m about to call out, you should consider selling them immediately.

(There are bargain replacements, after all. I’m talking about funds trading as cheap as $0.88 on the dollar and yielding 7.2%. We’ll discuss specifics in a moment.)

“First-level” income seekers can be greedy one minute and fearful the next.… Read more

Read More

A little over two months ago, in an article for Contrarian Outlook, I spotlighted a nice short-term buying opportunity in the PIMCO Global StocksPlus & Income Fund (PGP).

PGP, with its 9.4% current dividend yield, is one of the most popular PIMCO funds, but it is one with a checkered past. And by checkered, I mean this:

Not for the Faint of Heart!

With up and down swings of 20% and more in a matter of months, PGP is a really volatile fund. And note those big dips in mid-2016 and mid-2017. There’s only one reason why huge drops like those appear for a closed-end fund (CEF) like PGP: dividend cuts.… Read more

Read More

Today I’m doing something unusual: I’m changing my call on a popular closed-end fund (CEF).

Why?

Because this fund has gone on sale, and it’s just too good of a deal to overlook. If history is any guide—and with this fund it almost always is—it’s in for some nice upside very soon. In the meantime, buyers will grab a hefty and safe 10.9% cash dividend!

So if you dropped, say, $100k into this fund tomorrow, you’d get nearly 11% of your investment back—in cash—just one year from now (and I should also mention that it pays dividends monthly, too).…
Read more

Read More

If you take the mainstream financial media at face value, you might be under the impression that all high yield bonds are in big trouble with interest rates on the move.

Wrong.

The best bond portfolios haven’t actually budged since the recent market insanity began. Take, for example, our favorite PIMCO play. Its net asset value (NAV, the actual market value of its holdings) held steady while the stock market was dropping sharply:

What Crash? This NAV is Steady

The fund’s price, meanwhile, eased down 2.2% from peak to trough. But we shouldn’t confuse price with value – we should focus on the latter, which is a more accurate measure for investing profits.…
Read more

Read More

Categories