3 big dividends (7.9%) built for post-election drama

Well, that was quick. As you probably already know, stocks returned their post-election rebound almost as quickly as they took it. Today, they are more or less where they started the pre-election period.

There is a story behind this “pop and drop” that showed me something we need to keep increasingly in mind as we approach 2025 (and a new presidential term): the need to diversify our portfolios, not only within stocks but (importantly, with more volatility likely) beyond them.

And this need for diversification also applies to our high-yielding closed-end fund (CEF) holdings.

Now, market veterans will no doubt say that these short-term moves are just noise and that in the long run it doesn’t matter who the president is. There is certainly some truth in that.

Market euphoria followed the 2016 vote…

In 2016, when President-elect Trump’s first victory stunned the world, stocks rose, even as some commentators predicted a crisis.

It’s worth noting the shape of the line in the chart above, however: stocks were already rising sharply before November 8, 2016, when the results became clear.

And as is the case in any other administration, stocks have also fallen on hard times during Trump’s first term, with the S&P 500 falling just over 6% in 2018, the first year of declines. the index in a decade.

And yes, when President Biden won in 2020, we saw a similar market rally:

…And the 2020 elections too

The truth is that election results don’t really change the long-term trajectory of the stock market, and it’s really no surprise that stocks are back to pre-election levels.

In the long term, stocks create wealth

That said, certain proposals, particularly regarding customs duties, would affect certain sectors more than others. And there’s the fact that the market has exploded this year. And then, of course, there are things that catch everyone off guard, like the selloff we saw earlier this week due to heightened tensions around Ukraine.

This uncertainty, combined with the strong rise in stocks this year, do suggest that we could see a pullback in the short term.

But we do not I want to go cash in response. On the one hand, we are going to eliminate our payments! Additionally, we will likely miss out on stock market gains (since investors who sell in panic almost always buy back too late) and leave ourselves vulnerable to inflation.

This is where the CEFs come in, because they allow us to do the opposite liquidity: prepare for gains And higher income as volatility increases.

The members of my CEF Insider service know the value of high CEF returns in times like these: CEFs return 8% on average, and our CEF Insider the portfolio yields even more: 9.4% as of this writing, with 80% of our holdings paying dividends monthly.

Another thing that often surprises new CEF investors is the diversification we can get from these funds: there are CEFs holding everything from stocks and bonds to preferred stocks, real estate investment trusts (REITs) and utility stocks (even blue-chip tech). So if the market moves from stocks to bonds or REITs, for example, we are covered if we have a diversified CEF portfolio, because we will hold all three.

Here’s a quick example of a portfolio of three CEFs that will give you exactly this type of diversification, as well as a nice average dividend of 7.9%.

CEF n°1: a 6.5% payer who benefits from volatility

THE Nuveen NASDAQ 100 Dynamic Surrogate Fund (QQQX) is a 6.5% yielding stock fund that, as the name suggests, focuses on the NASDAQ 100 index. If you’ve been investing for a while, you know that the NASDAQ is a better performing index than the S&P 500, but it is also more volatile.

QQQX mitigates this volatility by selling call options on its holdings, which translates this volatility into an income stream that supports this payout. The cost of this higher dividend is the fact that the sale of call options do hurt the fund’s overall performance as its best-performing securities are sold or “recalled.”

However, this effect is somewhat offset by the higher historical returns of the NASDAQ relative to the S&P 500. The overall result is a similar return to the S&P 500 for the QQQX, with a much larger revenue stream than paying 1, 3% on an S&P 500 index. funds:

QQQX paying 6.5% offers S&P 500-like returns

Plus, the fact that the fund “clones” the NASDAQ means you get exposure to the best technologies, like NVIDIA (NVDA), Apple (AAPL) And Microsoft (MSFT) as well as non-tech companies in the index, such as PepsiCo (PEP), Costco Wholesale (COST) And Starbucks (SBUX).

Finally, this one stands out for its 10% discount on the net asset value (NAV, or the value of its underlying portfolio). This is especially interesting given the increased volatility we are seeing these days.

CEF n°2: a corporate bond fund managed by the first name of CEF

Let’s complement that 6.5% dividend yield with a fund that has a portfolio of corporate bonds and bond derivatives that it actively manages to respond to the Fed.

The result? Whether rates go up or down, PIMCO Business and Income Opportunities Fund (PTY) will position itself to maintain its dividend yield of 9.8%. It also has a tremendous track record, returning over 1,000% over the past 20 years.

Significant gains for PTY shareholders

I have a caveat here, though: this one trades today at a 25% premium to NAV, but that’s the price you pay to own a fund managed by PIMCO, a name so popular. touted in the field of CEFs. This is also about the premium the fund has traded at over the past five years, so the markup isn’t completely unusual (although I prefer discounted funds like the 5 which I will tell you more about here).

CEF #3: A REIT fund paying more than you would ever get from a rental property

Finally, we can acquire attractive real estate with the appropriate name Cohen & Steers Quality Real Estate Income Fund (RQI).

This one is still on my watch list because of its 197 holdings, many of which are in REITs that own thousands of buildings themselves. Top titles include cell tower owner American Tower Corp.Warehouse REIT Prologis (PLD) and data center owner Digital Real Estate Trust (DLR).

That’s about as diversified as it gets, and it’s an approach that has delivered a solid total return that includes a high payout: RQI yields 7.4% and trades at a 4% discount, which is roughly where it has traded, on average, over the past five years.

Reliable long-term profits

In addition to REITs, RQI also holds bonds and preferred stocks (stock-bond hybrids that trade on a market, like stocks, but whose payments tend to be fixed, like a bond). With such diversification, no matter where America ends up under President Trump’s second administration, you’ll be there to reap a share.

Buy These 5 “Low Drama” Funds Now (For 10.5% Returns, Monthly Payouts)

In times like these, stocks and funds that pay dividends MONTHLY give us even more peace of mind than those that simply pay a high yield.

Of course, monthly payments are added to our bills, and that’s a very good reason to prefer them. But more importantly, it’s simply comforting to receive that reliable payment every 30 (or 31) days, rather than having to wait 90 days or more. Especially when the markets are shaking under our feet.

That’s why NOW, with so much seeming uncertain, I recommend a diverse collection of 5 CEFs that pay us every month. And they also yield an outsized 10.5% return.

Think about this for a second: every year we earn more than 10% of the value of our initial investment in these funds in the form of cash dividends. And it comes in the form of reliable payments that flow, drip, drip into our accounts monthly.

Now is the time to buy these 5 monthly paying CEFs, while they are still good deals. Click here and I’ll tell you more about these 5 “Gibraltar-like” money plays and give you a free special report revealing their names and tickers.

See also:

• Warren Buffett Dividend Stocks
• Dividend Growth Stocks: 25 Aristocrats
• The future dividend aristocrats: tight competitors

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.