This 5.5% Tax-Advantaged Dividend Soared Overnight (How It Could Happen Again)

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Every now and then in income investing, we get a sweet setup where a “boring” high yielder absolutely soars—practically overnight.

I recently saw such a scenario play out with a closed-end fund (CEF) called the BlackRock Municipal Income Fund (MUI). I bring it up now because what happened with MUI has a lot to teach us about how we can get stock-like gains from a so-called “boring” income play like this.

Despite its sleepy-sounding name, MUI is what I consider a “triple threat” investment because it can pay us in three different ways:

  1. Its dividend, which yields a high 5.5% and has been remarkably stable, even throughout the low-rate 2010s.

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Closed-end funds (CEFs) are incredible wealth generators, combining huge (8%+, in many cases) dividends, with the potential for stock-like price gains.

But to make the most of them, you need to look at one essential indicator: the discount to net asset value (NAV, or the value of the fund’s underlying portfolio).

We don’t have to go too far into the weeds here: it’s just another way of saying that CEFs can, and often do, trade for less than their portfolios are actually worth.

That makes our approach straightforward: Buy when a CEF trades at an unusually deep discount—then ride along as that discount dissipates, driving the price higher as it does.… Read more

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ETFs, mutual funds—and, yes, high-yielding closed-end funds (CEFs)—all have one surprising new year’s resolution this year: cutting their management fees.

But unlike my resolution to stop eating donuts and work out three times a week, this is a resolution that managers of these funds will likely keep—setting their funds up for higher returns as a result.

Why? Because their feet are being held to the fire.

Activists Push for Big Fee Cuts

Truth is, there’s a quiet shift happening in the world of fund management, with more people clamoring for lower fees on all kinds of funds, including CEFs like those we recommend in my CEF Insider service, whose portfolio yields 9.0% today.… Read more

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Don’t lament the lack of a Santa Claus rally this year, because it comes with a bright silver lining: we dividend investors have more time to pick up big yields on the cheap.

Here’s why: America’s economy is still growing, with analysts booking forecasts for 3.7% earnings growth in the fourth quarter of 2022. What’s more, sales for S&P 500 companies are up 10%, and earnings have been rising all year.

Yet the market is still downbeat.

In other words, share prices are divorced from reality, and it’s only a matter of time before they correct. However, given the year we’ve had, it could still be a while before investors develop an appetite for stocks again.… Read more

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