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).
Top 10 “High Income NOW” Opportunities: May Update
As fear of more bank defaults climbed over the last month, so has the yield in our High Income NOW portfolio, currently sitting at 10.2%. There was a “flight to quality” in dividend blue chips, while short-term treasury yields climbed (the 6-month currently yields over 5%), keeping the yield curve very inverted (a sign of looming recession) while the Fed may have just completed its final rate hike of 2023. In this report, we countdown our new top 10 “High Income NOW” opportunities (the rankings have changed) as we position the strategy for more big income payments ahead.
Attractive 11.7% Yield Monthly-Pay Bond CEF
If you are seeking big steady income, from a top-shelf manager, that currently trades at a discount to NAV, and may be set for dramatic price appreciation heading into the end of 2023 (as fed rate hikes peak and then are expected to reverse), the 11.7% annual yield (monthly pay) closed-end fund (“CEF”) we review in this report is worth considering.
US Bancorp: 5.6% Yield, 3 Big Risks (Short Seller Edition)
So far this year, US Bancorp (USB) is one of the worst performing stocks in the S&P 500 (it’s down over 20%), and it now offers one of the highest dividend yields (5.6%). And a lot of income-focused contrarian investors are increasingly tempted, especially considering the bank has raised its big dividend for the last twelve consecutive years in a row. After reviewing US Bancorp and its current valuation, we consider three big risks to investors (with a regulatory-induced dividend cut perhaps the biggest, as described by a recent HoldCo short-seller report), and then conclude with our strong opinion on investing.
Ares Commercial Real Estate: It Can Still Get Much Worse for this 16.1% Yield
Members Mailbag: We received an inquiry from a member this week about ACRE (expected to announce earnings on Tues May 2nd). We believe that some investors view this particular mortgage REIT (ACRE) as an attractive contrarian opportunity, considering the shares are down big (-40% over the last year), the yield has mathematically grown to a tempting 16.1%, and it has a well known brand name attached to it (Ares). However, the commercial real estate market is terrible. We share comparative data points on over 100 big-dividend REITs (sorted by sub-industry), dig into some important details on ACRE, and then conclude with our opinion on investing.
Owl Rock: 40 Big-Yield BDCs, Compared
With BDC earnings season set to kick off this week (starting with Ares Capital on Tuesday pre-market), we’ll also be watching Owl Rock closely (set to announce two weeks later). One key metric to watch will be book value as the economy heads towards recession and write-downs could start to more significantly detract from the benefits of rising interest rates. This quick note shares data on 40 big-yield BDC, and digs into Owl Rock in more detail.
Hated 5.9% Yield Dividend-Growth Stock, Attractive
The stock we review in this report is hated. And it is hated for multiple reasons. However, the market is misinterpreting some of the data, and the fear is overdone. After reviewing the details of this impressive dividend aristocrat (including its business, dividend safety, valuation and risks) we conclude with our strong opinion on investing (hint: we currently own shares in our Income Equity portfolio).
Cell Tower REIT: Growing Dividend, Paying Down Debt
The specialty REIT we review in this report focuses mainly on cell towers. The dividend is well covered and has a steady history of increases. Further, the company is virtually guaranteed revenue growth from rent escalators, not to mention the growing secular trends of mobile data usage and the Internet of Things. Further still, the company is working to improve its balance sheet. We review all the details, and then conclude with our opinion on who might want to consider investing.
Ares: 40 Big-Yield BDCs, Silicon Valley Bank Warning
Business Development Companies (“BDCs”) are like banks, only riskier. And some BDCs are heavily concentrated in the venture capital (“VC”) space, just like Silicon Valley Bank (SIVB) that just shuttered its doors as the result of a VC-led bank run. In this report, we review Ares Capital (including its investment industry exposures and risks) and then compare it to 40 other BDCs, including four in particular that are heavily concentrated in the VC space. We conclude with our strong opinion about investing in BDCs, Ares Capital and VC-focused BDCs in particular.
Update: PDI and PTY: Ugly ROC, Buyer Beware
UPDATE: Unbeknownst to many investors, PIMCO’s big-yield funds, PDI and PTY, are including a significant return of capital in their beloved big distributions (and it’s largely hidden through derivative swaps transactions). We reached out to PIMCO for comment, and found their replies (included in this report) concerning. These two big-yield PIMCO funds are simply not as good as many investors believe. Caveat emptor.
PDI and PTY: Ugly ROC, Buyer Beware
The PIMCO Dynamic Income Fund (PDI) and PIMCO Corporate & Income Opportunity Fund (PTY) are absolute favorites among many income-focused investors. They both have long track records (one decade and two decades, respectively) of successfully delivering big monthly income payments (they currently yield 13.5% and 10.6%, respectively) and because they’ve sourced all that big income over the years without the return of capital (“ROC”) that plagues so many other high-income funds. However, a look under the hood reveals that these two PIMCO trophy funds have, in fact, been using ROC to fund their distributions (despite marketing materials that suggest otherwise). In this report, we review all the important details and then conclude with our strong opinion on investing—caveat emptor!
6.1% Yield Bond ETF: Matures in December
Bonds have been a disaster for many investors over the last year. As interest rates have risen, bond prices have fallen, and “safe” bond funds have delivered very negative returns (such as (BND) (HYG) and (PDI), to name a few, see chart below). In this report, we review a bond ETF that pays monthly, offers a 6.1% yield and avoids all the interest rate risk (i.e. if you hold it until maturity in December, your annualized yield to maturity will be 6.1%). We review all the important details and then conclude with our strong opinion on who should consider investing.
CEF: 6.9% Annual Yield, Attractive Strategy
If you are truly a long-term income-focused investor, the closed-end fund (“CEF”) we review in this report is attractive for a variety of reasons. For starters, it offers a 6.9% yield and it trades at a compelling discount to its net asset value (“NAV”). However, we particularly appreciate the fund’s flexible, low-turnover and prudently-concentrated long-term strategy (not to mention its very long-term track record of success). After reviewing these qualities, plus multiple critical risk factors, we conclude with our opinion on why this fund remains such an extremely attractive long-term opportunity for income-focused investors.
PFF: 40 Big-Yield Preferred Funds, Compared
Preferred Stocks are often misunderstood. They can grab the attention of income-focused investors because of their big yields, but beyond that—many investors just don’t understand how they work. In this report, we review the nuances of preferred stocks (that investors absolutely need to know), and then share data on 40 big-yield preferred stock funds, with a special focus on PFF, plus a few more in particular that are worth considering. We conclude with our opinion on who might want to invest, and how best to go about doing that.