The market continues to climb a wall of worry, and some investors believe it’s getting a bit ahead of itself. For example, the S&P 500 is up +6.9% this year and up +27.4% over the last 12 months, but we keep hearing stories about a sputtering economy. If you are concerned the market is ahead of itself, and we may be due for a healthy pullback, here are 3 high-income investment opportunities for you to consider.
1) Closed-End Funds: PIMCO Dynamic Income (PDI): 13.7% Yield
When it comes to big steady monthly income payments, PIMCO closed-end funds (“CEFs”) are the industry leader, and they currently offer some particularly compelling opportunities. For example, PIMCO bond funds, such as PDI, PDO and PAXS are particularly compelling right now for several reasons.
For starters, they all pay income monthly—that’s attractive to some investors as compared to the typical quarterly dividends of most stocks.
Second, the income payments (distributions) are larger than just about every other reputable income source in the market. And PIMCO has enormous resources and competent investors to manage these funds.
Third, bond funds are particularly attractive now as the fed has stopped raising rates and may begin cutting later this year. Rate hikes cause bond prices to fall, but now that rates have stabilized, PIMCO bond fund prices have too (and the healthy high-income payments continue).
2) Dividend Growth Stocks: Mondelez (MDLZ), yield 2.3%:
Mondelez makes snack foods and beverage products, and it currently trades at an attractive valuation (21 x forward earnings), especially considering business continues to grow at a healthy clip. It’s highly rated by Wall Street (24 of 27 analysts rate it a buy or strong buy), and its quarterly dividend has increased every year for the last 10. The dividend yield is only 2.3%, but of course that keeps growing and the shares appear to have relatively consistent upside too.
If you are looking for a bit less volatile stock to ride out any market volatility (better than other stocks), Mondelez is worth considering, especially now.
3) Spending Long-Term Gains: Meta Platforms (META), yield 0.1%:
If you are an income-focused investor, the thought of investing in a volatile high-growth stock like Meta Platforms may seem absurd, but if you think a bit more long-term you may see value for yourself in generating more of your spending income needs from capital gains on your stocks that go up.
Meta has a growing history of healthy price gains, and the company is on a trajectory to continue gaining considering its high growth trajectory and push into using more artificial intelligence in its business (i.e. Facebook, Instagram, WhatsApp).
Also, Meta just recently initiated its first ever quarterly dividend. Our guess is Meta will growth this dividend annually like the other mega caps that pay dividends (i.e. Apple and Microsoft). Facebook is an extremely profitable high growth company that has tons up upside potential.
If you are worried about near-term volatility, and depending on your situation, you could just consider riding out the storm (i.e. thinking long-term—such as years and decades in advance). Long-term compound growth can create some of the most powerful income streams (by selling some of your winners for spending cash!).
The Bottom Line
If you are an income-focused investor, the market presents some very attractive income opportunities, especially among concerns that the market is getting ahead of itself and perhaps overheating:
PIMCO bond funds offer an attractive high-income contrarian opportunity.
Mondelez is attractively priced, growing, and pays a healthy growing dividend too.
Facebook initiated a new dividend, but it is mainly the company’s long-term growth that can create plenty of future spending power for you.
At the end of the day, you need to invest in opportunities that are right for you. Don’t get pigeonholed into a strategy that sounds good but doesn’t really meet your needs. And don’t get forced into bad decisions because you are worried about near-term market volatility. Disciplined goal-focused investing continues to be a winning strategy.