By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
AmextaFinanceAmextaFinance
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Notification Show More
Aa
AmextaFinanceAmextaFinance
Aa
  • Banking
  • Credit Cards
  • Loans
  • Dept Management
  • Mortgage
  • Markets
  • Investing
  • Small Business
  • Videos
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Follow US
AmextaFinance > Investing > Invest Like Taylor Swift For 10% Dividends
Investing

Invest Like Taylor Swift For 10% Dividends

News Room
Last updated: 2023/05/24 at 9:47 AM
By News Room
Share
6 Min Read
SHARE

This week, we’re going to pick up some rich 8%+ payouts alongside … Taylor Swift?

You read that right. Turns out the favorite singer of everyone from, well, my two daughters to the attorney general of the United States is a fan of our favorite income plays: closed-end funds (CEFs).

That news broke in the form of a tweet from billionaire investor Boaz Weinstein, head of Saba Capital Management. Weinstein apparently heard from Swift’s dad (who used to work for Merrill Lynch) that the singer does, indeed, hold CEFs.

“Having a blast watching our daughters sing every lyric tonight in Philly,” Weinstein tweeted. “Did you know that @taylorswift13 invests in discounted closed end funds? You think I’m kidding, but her father, Scott, told me so!

In some ways, that’s no surprise. Swift has long been known to be a canny financial operator. She was, after all, one of the few celebs who saw the FTX crypto mess coming a mile off, refusing to endorse it while others—Larry David, Tom Brady and even business “expert” Kevin O’Leary among them—got pulled in (and are now facing a class-action lawsuit).

But even so, CEFs are a pretty obscure corner of the market, even for a savvy investor, with only 500 or so out there. But Swift apparently knows the score: as Weinstein says, she not only buys CEFs, but focuses on CEFs trading at a discount to net asset value (NAV).

We contrarians agree—so much so that your income strategist wonders if Swift has been browsing the pages of Contrarian Income Report.

We’ve long panned the idea of buying CEFs at a premium. So we never, ever, ever do it. (Sorry, couldn’t resist!) But buying at a discount sets us up to “ride along” as that deal disappears, propelling the CEF’s price toward the fund’s NAV as it does.

And while we wait, we pocket a rich dividend, too. These days, payouts north of 8% are common in the CEF world.

Weinstein, who you may remember made a fortune back in the mid-2010s betting against the JPMorgan trader known as the London Whale, is a fan of CEFs, too. Here’s what he had to say about these funds back in 2017:

“You go into it hoping the discount will narrow on its own, but one of the nicest points about this investment is that while you wait, you earn an above average yield, given the discounted price.”

That’s one of the best quotes I’ve ever seen on the power of CEFs. But it is missing one detail: buying CEFs at a discount alone isn’t quite enough—you need to look at the discount as it relates to its historical pattern.

After all, a deep CEF discount is no good if management has no plan to close it. Which is why we want to avoid CEFs that are always cheap, like the Royce Micro-Cap Trust (RMT), which sports a 13% discount to NAV and yields around 9%.

Trouble is, RMT always trades at a discount—and that discount has actually gotten wider over the last five years!

That falling discount has been a lead weight on RMT’s market price. Sure, RMT investors have pocketed a 23.5% return, but that’s less than half the S&P 500’s 65%. And even that 23.5% is entirely because of the dividend. On a price basis, RMT is down significantly.

That’s why we want to see management with a plan to close a CEF’s discount. This way we have two ways to win (three when you include CEFs’ high dividends!):

  • NAV gains, from the appreciation of the CEF’s portfolio, and ..
  • Closing discounts, which we can see as a kind of afterburner, giving our returns an extra lift.

The Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG), holder of large caps like Apple (AAPL), Amazon.com (AMZN) and Coca-Cola (KO), is a terrific example of a closing discount in action.

From the time we added it to our Contrarian Income Report portfolio in October 2020 until we sold in February 2022 (just sidestepping the market dumpster fire that was to come), EXG’s discount narrowed from around 10% to 3.7%, driving a 28% gain in the share price in just under a year and a half.

There was more. Because in addition to its portfolio gains and the upside from its closing discount, EXG rewarded us with dividends during our holding period, to the tune of $1.03 for every share held, essentially “paying back” 14% of the $7.51 per share we paid for the fund.

The end result: a quick total return of just over 42%!

The best part is that you don’t have to be rich to profit from CEFs. Like Weinstein and Swift, we can pick up discounted CEFs on the open market and start tapping their 8%+ dividends (often paid monthly) straight away.

Brett Owens is chief investment strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: Your Early Retirement Portfolio: Huge Dividends—Every Month—Forever.

Disclosure: none

Read the full article here

News Room May 24, 2023 May 24, 2023
Share this Article
Facebook Twitter Copy Link Print
Leave a comment Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Finance Weekly Newsletter

Join now for the latest news, tips, and analysis about personal finance, credit cards, dept management, and many more from our experts.
Join Now
Trading firm Tower Research to launch fund for outside investors

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

Private market funds lag US stocks over short and long term

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

Scania in talks to form consortium to buy Northvolt’s R&D lab

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

Peter Thiel-backed crypto group Bullish files for Wall Street IPO

Unlock the White House Watch newsletter for freeYour guide to what Trump’s…

Snap to launch ‘Specs’ smart glasses to revive challenge to Meta and Apple

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

- Advertisement -
Ad imageAd image

You Might Also Like

Investing

Why Home Builders Are Bouncing Today—and Why Their Stocks Are Good Buys

By News Room
Investing

This Beaten-Down Industrial Stock Wants to Call America Home. Why It’s Time to Buy.

By News Room
Investing

These 8 Dividend Aristocrats Can Protect Your Portfolio in a Downturn

By News Room
Investing

Some Lenders Benefit From SBA’s Troubled Loan Program

By News Room
Investing

Social Security Is in Turmoil. Should You Lock In Benefits Now?

By News Room
Investing

Hims & Hers Stock Is Due for a Crash Diet. The GLP-1 Surge Is Fading Fast.

By News Room
Investing

Opinion: The stock-market selloff isn’t over yet. Here are 4 reasons why.

By News Room
Investing

With Trump’s tariffs paused, ‘Big Three’ automakers may race to build inventories

By News Room
Facebook Twitter Pinterest Youtube Instagram
Company
  • Privacy Policy
  • Terms & Conditions
  • Press Release
  • Contact
  • Advertisement
More Info
  • Newsletter
  • Market Data
  • Credit Cards
  • Videos

Sign Up For Free

Subscribe to our newsletter and don't miss out on our programs, webinars and trainings.

I have read and agree to the terms & conditions
Join Community

2023 © Indepta.com. All Rights Reserved.

YOUR EMAIL HAS BEEN CONFIRMED.
THANK YOU!

Welcome Back!

Sign in to your account

Lost your password?