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One of the biggest market paradoxes right now is that income stocks are more necessary than ever but harder than ever to find. Creating a risk-free income strategy like our parents and grandparents could just doesn't seem possible.
But you might be overlooking the best high-yield dividend stocks because you're not looking in the right place. Today, I'll show you how one of my favorite investment strategies can produce yields of nearly 10% or more.
And make no mistake – dividend-paying stocks are your best bet right now.
CDs, savings accounts, and bonds just won't yield enough to generate the income we need.
Income investing is not going to get any easier anytime soon either. The economy will not magically start growing again at a pace that will allow the Fed even to consider raising rates. The Fed has said it will be 2023 before that might happen. If we do not see a viable coronavirus vaccine, that's probably going to become a moving target.
Now, dividend stocks aren't without risk, but by targeting a select few closed-end funds, we can add some stability to our portfolios with some world-class managers.
Doing what everyone else is doing is unlikely to produce the results we need to achieve. Smaller closed-end funds can help us add exposure to nontraditional asset class that provides above-average amounts of income.
Here's how to do it.
Get Monthly Dividends with This Fund
Dividend Yield: 10%
Blackstone/GSO Long-Short Credit Income (NYSE: BGX) is a small closed-end fund managed by the credit division of one of the largest private equity and alternative asset managers in the world. Between the credit specialists at GSO and the private equity managers at Blackstone Group Inc. (NYSE: BX), there is not much that the people running this fund do not know about credit markets.
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While most fixed-income funds are long-only investors that buy things they like, this fund can also bet against things they do not like. In a turbulent and confusing market, this can give it an edge over other funds.
The closed-end fund is trading at a 10% discount to the value of its assets. That is well above the historical average discount, so the fund is on sale at the current price. The yield is 9.4%, and it is paid monthly.
It Pays to Own Gold Right Now
Dividend Yield: 10%
GAMCO Global Gold Natural Resources and Income Trust (NYSE: GGN) is a unique fund offered by Gabelli Asset Management.
The fund has to invest at least 80% of its assets in equity securities of companies principally engaged in the gold industry and natural resources industries. Right now, more than 50% of the fund's assets are in gold and other precious metals companies. Gold has been rising sharply amid all the turmoil caused by the pandemic.
The dollar has been falling and is likely to continue falling as our national response to the coronavirus has the rest of the world losing faith in the United States. Some economists think that the dollar could fall by as much as 35% against our major trading partners' currency.
When the dollar falls, gold rises.
The fund sells options against the positions in the fund to create an income stream. Between the dividends from the stocks the fund owns and options premiums collected, the Global Gold Natural Resources and Income Fund is paying out roughly 10% right now.
Shares of the fund are trading at a 12% discount to the fund's net asset value. That's more than five times the historical average. In addition to benefitting from the rise in gold prices and collecting a great income, owners of the fund could also benefit from the discount narrowing back to normal levels.
Our Best High-Dividend Stock Pays a Monster 14%
Dividend Yield: 14%
Rivernorth Opportunities Fund Inc. (NYSE: RIV) is another small high-yielding closed-end fund. This fund invests in other high-yielding funds trading at a discount to net asset value. The fund can also invest in exchange-traded funds to gain exposure to asset classes the fund's manager thinks are attractive. The managers have also allocated some capital to the red-hot special purpose acquisition company (SPAC) marketplace to boost total returns opportunities for the fund.
This fund is unlikely to trade at a significant discount as there is a provision allowing shareholders to vote to open-end the fund next year. Right now, it trades right at net asset value.
The fund gives you an instantly diversified portfolio. It owns closed-end funds that invest in fixed income, tax-free fixed income, U.S. stocks, and international stocks.
Rivernorth Opportunities Fund is currently yielding a whopping 14% that is paid in monthly installments.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.