If you like big steady income, the CEF we review in this article has delivered for decades. And it just got better this year after increasing its quarterly distribution meaningfully. Not to mention, it trades at a compelling discount to NAV which basically eliminates the small performance drag of its very reasonable expense ratio. Furthermore, it provides critical exposure to diversified equity (stock) markets that a lot of income investors frequently miss out on (because they’re overly concentrated in bonds and only a small subset of the equity market). And it does all of this in a highly-disciplined quarterly-distribution approach that allows many investors to “set it on auto-pilot” and sleep well at night.
Steady Income: 8.4% Yield CEF Worth Considering
If you are like a lot of people: (a) you recognize stocks have been very strong and may be due for a pullback, and (b) you don’t need homeruns from your investments at this point in life, just steady high income and a lot less volatility than the overall market. In this report, we review an attractive 8.4% yield “balanced” CEF with a healthy dose of utilities stocks (known for steady dividends and lower volatility), plus a side helping of bonds (also known for steady income) and a prudent amount of leverage (~25%). It also trades at a significantly lower price premium that it has been (compelling entry point) and pays distributions monthly.
SCHD: Big Win Ahead
The Schwab US Dividend Equity ETF (SCHD) is about to create a lot of stock market winners. In this report, we review five reasons why it is a superior strategy for many investors right now (including its volatility characteristics, current market conditions, dividend flows, tax advantages and clear practicality benefits), plus one critical risk factor investors need to consider. We conclude with our strong opinion investing.
PDI: The Big ROC Bath, 13.1% "Yield"
They often say “you don’t want to see how the sausage is made,” but in this report we are going to look under the hood at PIMCO’s Dynamic Income Fund (PDI) to see how this popular closed-end fund (“CEF”) really generates that big 13.1% “yield” (paid monthly). We put “yield” in quotes because it’s really an artificially manufactured “distribution” that recently included a massive amount of taxable return of capital (“ROC”) something many investors try to avoid like the plague. After reviewing the fund, the distribution and the risks, we conclude with our strong opinion on investing.
Ares Capital: 25+ Big-Yield BDCs Compared (Earnings Season Edition)
Income-focused investors are frequently attracted to business development companies (“BDCs”) for their large dividend payments. And among BDCs, Ares Capital (ARCC) is the stalwart blue chip that leads the industry (and currently offers a big 9% dividend yield). But before you invest in Ares, let’s take a closer look at what they do and how they compare to peers (especially ahead of this upcoming BDC earnings season). In this report, we review the business, the current market environment (especially fixed-versus-floating interest rate dynamics, plus rising non-accruals), what we like and don’t like (i.e. risks) and then conclude with our strong opinion on investing.
Despite Big Risks, 14.2% Yield BDC Worth Considering
BDCs are often an income-investor favorite because of their large dividend yields. And the BDC we review in this report stands out for its 14.2% yield (which is larger than many peers). However, the higher yield comes with higher risks (for example, net investment income just barely matched the dividend last quarter and the 0.88x price-to-book value suggests the market may be beginning to price in a dividend cut—especially considering 85% of their investments are floating rate while they also have a signifcant amount of fixed rate debts of their own). In this report, we reveiw the BDC and conclude with our opinion on investing.
Blue Owl Merger: BDC Storm Clouds Ahead, 11.9% Yield
The recently announced merger between Blue Owl’s two publicly-traded BDCs (OBDC) and (OBDE) is a warning sign that investors should heed. In particular, the combination between OBDC (flagship) with OBDE (slightly-more-conservative) is a precautionary step. Here is how we expect it to play out for Blue Owl and for the BDC industry in general.
PDI: The Case for Bond CEFs, PIMCO Leads
If you have been invested heavily in the stock market for the last few years, congrats—you’ve made a lot of money. But if your stage in life suggests now is the time to “de-risk,” your options might seem limited. In particular, bonds (the traditonal de-risking methodology) currently offer low yields (for example Vanguard’s popular bond ETF (BND) only yields 3.4%) and rates may be about to go even lower (i.e. the fed seems ready to cut). One bond alternative that offers several unique advantages is PIMCO’s 13.9% yield Dynamic Income Fund (PDI). In this report, we review the advantages of bond closed-end funds with a detailed focus on PDI. We conclude with our strong opinion on current bond CEF opportunities and PDI in particular.
Earnings Note: Oaktree Specialty Lending
Quick Note: Oaktree Specialty Lending Corp (OCSL) is a big-yield (+13.8%) BDC that has been declining in price, particularly following its latest earnings announcement this past week whereby its adjusted net investment income (“NII”) came in at $0.55 per share (a penny lower than estimates) and just matches its quarterly dividend of the same amount.
SCHD Part 2: Easy Alpha
In part one of this report, we explained why the Schwab US Dividend Equity ETF (SCHD) is for winners (including its growing dividend, low volatility and more). In this part two, we explain how SCHD can easily add big alpha to investor returns (in four very specific ways). In the conclusion of this report, we explain why many “SCHD haters” are usually barking up the wrong tree (they’re typically earning no alpha anyway) as well as our strong opinion on who should consider investing.
SCHD: Built for Winners
If you are looking to hit it big—move on, this article is not for you. If you are looking for healthy returns, healthy dividend income and healthy diversification (especially as certain mega cap growth stocks may seem precipitously overvalued), keep reading, this article might be for you (especially if you also like low fees, low volatility and tow taxes). In fact, all of these things, and more, combine to make the Schwab US Dividend Equity ETF (SCHD) a compelling opportunity for “emotionally intelligent” investors. And after reviewing the fund in detail (including the risks), we conclude with our strong opinion on investing.
A Top CEF: Big Steady Income, AI and Fed Tailwinds, Tax Advantages
The closed-end fund (“CEF”) we review in this report offers a big, steadily-growing, monthly-paid, tax-advantaged distribution (currently yielding 8.2%). And the fund does so by owning utility-sector stocks (known for lower volatility and steady dividend payments). In this report, we review the fund (overview, philosophy, investment process), its advantages (tax favorability, monetary policy impacts and artificial intelligence tailwinds) as well as risks (expenses, leverage, price premium). We conclude with our strong opinion on who might want to consider investing.
PDI: PIMCO Vs. BlackRock, 10 Big-Yield CEFs Compared
If you are an income-focused investor, you’ve likely considered PIMCO’s popular big-yield bond funds (often yielding in excess of 10%, paid monthly). You may have also considered BlackRock funds (although many perceive them as second rate to PIMCO). In this report, we compare high-level data on 10 big-yield bond funds (from PIMCO and BlackRock), and then dive deeper into PIMCO’s 14% yielding Dynamic Income Fund (PDI), including a discussion of its risks (such as leverage, interest rates, insufficient distribution coverage, confounding interest rate swaps and the potential for delayed recognition of “Return of Capital” that was previously taxed as ordinary income). We conclude with our strong opinion on investing.
Experiential REIT: Despite Risks, 6.0% Yield Worth Considering
If you are an income-focused investor, Real Estate Investment Trusts (“REITs”) can be attractive. And one REIT that stands out for its growing dividend yield (and growing funds from operations) is VICI Properties (an “experiential” REIT best known for its Caesar’s Palace and MGM Grand properties on the Las Vegas strip). In this report, we review VICI’s business (including what makes it special), dividend safety, valuation and risks. We conclude with our opinion on investing.
Main Street Capital: 40 Big-Yield BDCs Compared
BDCs are often an income-investor favorite (thanks to their big growing dividends). And among BDCs, Main Street Capital (MAIN) has consistently been a top performer. However, investors frequently misunderstand Main Street’s fundamentals (i.e. they incorrectly believe price-to-book is too high and they forget to properly consider special dividends when considering the yield). In this report, we share data on 40+ big-yield BDCs, considering current price-to-book values (versus history), current market conditions (including how much credit spread risk is priced in) and the breakdown of historical returns (in terms of price gains versus dividend income). We conclude with out strong opinion about investing in BDCs in general and Main Street Capital in particular.
Muni Bond CEFs: 2 Big "Tax-Equivalent Yields," Attractive
If you manage a big-yield portfolio in a “taxable account,” this report is for you. Municipal bonds are often exempt fom paying federal income tax, which means you can earn a higher “tax equivalent yield.” What’s more, certain well-managed and prudently-leveraged munipal bond CEFs trade at discounts to NAV and offer particularly compelling yields as management is taking actions to reduce the discounts (a good thing if you own them). In this report, we review two attractive big-yield muni bond CEFs that are worth considering for your taxable account.
Big-Yield (8%+) Equity CEF: Big Discount to Narrow
One of the largest holdings in our “High Income NOW” Portfolio got some good news recently, and the share price is up. We expect this CEF’s price discount (versus NAV) to narrow though year end (a good thing), and the long-term performance to be significantly better than most other big-yield opportunities. In this report, we review the strategy (and its relative attractiveness versus other big-yielders), the good news (and why we expect the current discount to NAV to shrink) and finally our strong opinion on who might want to consider investing.
USA's 10.0% Yield: Nudging Novices in the Right Direction
A lot of income-focused investors would miss out on the power of diversified stocks if it weren’t for closed-end funds like the Liberty All-Star Equity Fund (USA), currently yielding 10.0% (paid quarterly). However, a look under the hood reveals this popular fund is only an incremental improvement for many investors, and it omits many of the qualities that make many other CEFs so attractive. In this report, we review USA (including the strategy, distribution, expenses, leverage, holdings and price versus net asset value (NAV)). We conclude with our strong opinion about investing in USA.
PTY: Despite 3 Big Tax Risks, 10.1% Yield Worth Considering
There seems to be no shortage of big-yield investment ideas on the internet. However, any discussion of the associated tax consequences seems sparse. And despite this spareness, taxes have a major impact on your bottom line and should absolutely be a major consideration before investing. In this report, we first review important details on PTY’s big 10.1% yield, and then dig deeper into three big tax risks (including your account type, your personal tax rates, and the tax inefficiency of PTY versus compelling big-yield alternatives). We conclude with our strong opinion on investing in PTY and some general (but very important) advice on building a big-yield investment portfolio to optimize your after-tax bottom-line income.
Ares Capital: Building A Monster-Yield Portfolio (BDCs, CEFs, REITs)
If you are an income-focused investor, building a monster big-yield portfolio (8% to +11% yields), across a variety of categories (such as BDCs, CEFs and REITs), can help you achieve your goals. In this report, we share updated data on the top 7 securities (by market cap) in each of the three categories, and then dive deep into BDC Ares Capital (ARCC) (including its business strategy, current market environment, valuation, dividend safety and risks). We conclude with our strong opinion about constructing a high-income portfolio and about investing in Ares Capital.