If you are a big-yield contrarian investor, the CEF we review in this report is attractive for multiple reasons. For starters, it invests in a low-volatility “safe” market sector (that is currently underperforming and thereby creating an attractive contrarian opportunity, as we will explain). Next, it trades at a massive (and very inappropriate) discount to its NAV following a distribution right-sizing a few months ago (emotional investors have dramatically overreacted). The combination of these two factors have created a highly-compelling long-term investment opportunity for income-focused contrarian investors.
PDI vs. PDO: Building A Monster Big-Yield Portfolio
There are as many prudent dividend strategies as there are dividend investors. However, in this report, we review three specific income-focused portfolio strategies, including monster big yields, dividend growth investing, and build-your-own income. Next, we dive into the details on two monster big-yield closed-end funds (“CEFs”) from PIMCO (PDI and PDO). After comparing these two funds in detail (including the 7 things we always consider when evaluating CEFs) we conclude with our strong opinion on which one is better, and how they fit (or do not fit) into our prudently diversified High Income NOW portfolio.
BMEZ: Big Distribution Cut, 17.0% Discount to NAV
The Income Game Has Changed: Treasuries, Money Market Funds
If you haven’t been paying attention, shorter-term interest rates have risen sharpy, and investments that seemed absurdly inappropriate just two years ago—are now worth considering. For example, a 6-month treasury bill (see chart below) now yields its highest rate in over 20 years! Specifically, it’ll pay you over 5.4%--whereas 2 years ago it was ~0.0%! And interestingly, short-term treasuries yield more than long-term treasuries (i.e. an inverted yield curve which some suggest is a sign of economic challenges on the horizon).
PDI: Attractive 14% Yield, Big Hidden Costs
PIMCO’s Dynamic Income Fund (PDI) is popular among income-focused investors, and it should be. It offers big monthly distribution payments (that have increased over time), and it occasionally pays additional special dividends too. Plus, the fund is managed by a world-class company, PIMCO. However, there are significant costs, both implicit and explicit. In this report, we weigh the fund’s attractive qualities against its various costs, and then conclude with our strong opinion on investing.
Energy Transfer: Tempting Big Yield, Dynamic Big Risks
If you are an income-focused investor, Energy Transfer offers a tempting 9.7% yield. Especially considering the stable fee-based income, the healthy distribution coverage ratio and the ongoing volume growth trajectory. However, there are variety of big risk factors that investors should consider, including debt levels, MLP tax considerations, management team, the lack of a strong competitive moat, rising interest rates, regulations, environmental concerns and the overall volatility profile of the industry. In this report, we provide an overview of the business, consider the attractive qualities that make the distribution so tempting, review the risks, evaluate the current valuation and then conclude with our opinion on investing.
Hercules: Big Yield BDC, Very High Valuation
Hercules is a big-dividend (9.4% yield, not counting supplemental dividends) business development company (“BDC”) that we purchased in March and that has now experienced significant share price gains since the Silicon Valley Bank panic at that time (Hercules provides financing in the same high-growth / venture-backed lending space). And the shares now trade at a very high price-to-book valuation. In this report, we review the business, current market conditions, the company’s financial position, dividend, valuation and risks. We conclude with our opinion on investing.
6.3% Yield REIT: 10 Good Things, 5 Big Risks, 1 Conclusion
The 6.3% dividend yield REIT we review in this report recently announced quarterly earnings, whereby it beat expectations. However, the share price is down this year (despite gains for other top dividend REITs), thereby leaving investors wondering what is happening and if the shares are worth investing. In this report, we review the company and its strategy, and then review 10 good things about it, 5 big risks to consider, and finally share our one bottom line conclusion about investing in this big-dividend REIT.
30 Top Big-Dividend REITS, Compared
In this report, we share data on 30 top big-dividend REITs. And when comparing them, it is important to note that they come in a wide variety of types (for example sub-industries) and require very different forms of analysis. The 30 in this report are widely followed, and investors have passionately different viewpoints. We share ours in this report, including information on the ones we currently own, the ones we are avoiding, and the REITs that are high on our watchlist (and that we may purchase soon).
Ares Capital: 40 Big-Yield BDCs Compared
Many income investors love Ares Capital (ARCC) for its big dividend yield and long history of healthy performance. But considering the current market environment, are the shares still worth owning? Or are there better BDC options available? In this report, we share comparative data on over 40 big-yield BDCs, and then dive deeper into Ares (including its business, valuation, dividend safety and risks). Next, we briefly consider two Ares alternatives (Blue Owl and Hercules Capital). Finally, we conclude with our strong opinion on investing in these specific big-yield BDC opportunities, especially with BDC earnings season right around the corner.
*New Trade: Sold Owl Rock (Now Blue Owl), Purchased This BDC Instead, 11.2% Yield
This is a quick note to let readers know we have placed a new trade in our Blue Harbinger High Income NOW and Income Equity portfolios. Specifically, we have sold 100% of our position in Owl Rock Capital (ORCC) (recently renamed Blue Owl, (OBDC)) and replaced it with this (see below) highly attractive 11.2% yield BDC instead. We’ll be updating our portfolio tracker sheets shortly, but wanted to share this information with readers right away.
Big-Yield BDC: Why This 11.2% Yielder May Be Set For Gains Ahead
Business Development Companies (BDCs) are another income-investor favorite thanks to their very large dividends and potential for price gains. In this report, we review an attractive BDC that has positioned itself for solid performance ahead (i.e. potential dividend and price increases). We review the business, the market, the dividend safety, valuation and risks, and then conclude with our opinion on investing.
NMZ: 50 Big-Yield Municipal Bond CEFs, Historically Large Price Discounts
Big Yield Bond CEFs: Is It Safe To Invest? (Interest Rate Risk)
Income-focused investors love big-yield bond CEFs because of their large distributions payments, often paid monthly. But if you’ve been following along, you know most of them (i.e. the popular PIMCO and BlackRock bond CEFs) have been feeling a lot of pain over the last year (because as rates have gone up, bond prices have gone down). Granted some investors don’t care about price as long as the income keeps rolling in, but it really does matter. In this report, we provide an update on three popular Bond CEFs (two from PIMCO and one from BlackRock), and share our views on whether the interest rate environment is signaling an “all clear” sign. We conclude with our strong opinion on investing.
Is Verizon 7.2% Dividend Yield Worth the Cost?
Verizon’s 7.2% dividend yield is increasingly tempting to many income-focused investors. However, many of those same investors are reminded of AT&T—another telecom that was recently forced to cut its big dividend as the payout got way ahead of the company’s cash flows. In this report, we review Verizon’s business, dividend safety, valuation and risks (including the new Amazon Prime threat), and then conclude with our opinion on investing.
Top Dividend Dogs of the Dow: This Healthcare Stock is Attractive
“Dogs of the Dow” is an investment strategy that essentially involves investing in the 10 Dow Jones stocks with the highest dividend yields. In this report, we review the strategy and then dive into one name from the list that is particularly attractive. Specifically, we review a healthcare sector Dog of the Dow with a compelling 3.8% dividend yield and a low stock price as compared to its value. We conclude with our opinion on investing.
USA: Top 20 Big-Yield CEFs, Discount-Premium Edition
The Liberty All-Star Equity Fund (USA) is a popular big-yield closed-end fund (“CEF”). It offers an annual distribution yield equal to 10% of its net asset value (“NAV”) with 2.5% paid quarterly. And it currently trades at a discount to its NAV (it previously traded at a large premium). In this report, we review USA in detail, and then compare it to 20 other popular big-yield CEFs from varying categories (including some important guidelines on when it might be okay to purchase a CEF at a premium to NAV and when it might not be). We conclude with our strong opinion about investing in USA and a few other CEFs in particular, especially considering their current price premium-versus-discount dynamics.
DNP Select Income Fund: 7.6% Yield, 23.2% Premium to NAV
The DNP Select Income Fund (DNP) is an income investor favorite, offering a steady monthly distribution (current yield: 7.6%) by investing in utility sector stocks and investment grade bonds (both known for safety and stability). However, the shares currently trade at a large 23.2% premium to the fund’s net asset value (“NAV”). In this report, we review the strategy, the leverage, the distribution, the distribution reinvestment plan and the performance. We conclude with our opinion on whether this fund is worth considering for investment, or not.
Infrastructure CEF: 8.2% Yield, Discounted Price
The closed-end fund (“CEF”) we review in this report is compelling for a variety of reasons, including its big monthly distributions, discounted price and attractive investment strategy (it invests in infrastructure securities, both stocks and bonds). In this report, we review the important details and risks that investors should consider, and then conclude with our strong opinion on investing.
Top 10 Dividend Stocks (Income Equity Portfolio) May Update
If you like disciplined long-term total returns and compound growth (i.e. making money) through a combination of healthy dividend growth and long-term share price appreciation—this list may be for you. These aren’t the biggest yielding stocks, and they’re not the most rapidly growing business. But these are healthy, growing, blue chip companies, that can help a lot of people sleep well at night through a combination of impressive dividend growth and powerful share price appreciation potential (i.e. they’re trading at attractively discounted prices relative to their long-term value).