5 Discounted Monthly Dividends Paying Up To 11.4%

 | May 15, 2022 12:21AM ET

Every legendary investor worth their salt has some sort of phrase to describe what investors should be doing right this very minute.

“Be fearful when others are greedy, be greedy when others are fearful.”

“Buy when there’s blood in the streets.”

Largely speaking, most stocks on the market are on sale to some extent. And sure, we could go out and make a few targeted bets on these bargains.

But I’d prefer to squeeze even more value out of the stock market.

Enter closed-end funds (CEFs).

h2 Why CEFs Are Our Best Option Now/h2

If we were to go out and buy an exchange-traded fund (ETF) that invests in, say, the NASDAQ Composite or Russell 2000, or really any area of the market you felt was underpriced, you’d be able to enjoy in the collective discounts of all their holdings. No more, no less.

But with CEFs , we can do even better.

My mom, to this day, refuses to pay the sticker price. If there’s a coupon to be found, she’ll not only find it, but she’ll also find another coupon to secure a double-discount (even if it requires management approval to apply)!

And just like my mom, we can secure a double-discount by investing through closed-end funds.

You see, unlike ETFs, which can create and destroy as many shares as needed to meet market demand, CEFs go public with a specific number of units, and that number doesn’t really change over time.

Because of that, CEFs’ net asset value can become untethered from the value of its holdings. Sometimes, that NAV can be worth significantly more, in which case the closed-end fund will trade at a premium, say $1.05 for every $1 in holdings.

But sometimes, you get the better other edge of that sword, and buy a CEF at a discount to NAV, paying, say, 95 cents for every $1 in holdings.

When you combine that with a broader market that’s already on sale, we contrarians can take a page out of my mom’s playbook and get a double-discount that, in the case of the five funds that I’m about to show you, can allow us to purchase shares for as little as 81 cents on the dollar!

Let me introduce you to five CEFs that will allow you to do exactly that. And in addition to trading at a significant discount (of 10% or more), these funds offer fat yields of 7% and more—and better still, pay out their distributions each and every month.

We’ll start out with a fund that’s actually doing quite well this year:

h2 1. First Trust MLP And Income Closed Fund - 7.7% yield/h2

Energy has been the market’s hottest sector in 2022, and it’s not even close. The sector is up 38% so far—and it’s the only one in positive territory! Second-best is utilities with “just” a 1% decline.

Get The News You Want
Read market moving news with a personalized feed of stocks you care about.
Get The App

That said, energy-infrastructure master limited partnerships (MLPs) haven’t been quite as explosive. First Trust’s, for instance, is up just 7%, which is far behind the broader energy sector and only half as good as most indexed MLP exchange-traded funds.

Oil Prices Are Flying, But FEI Is Just Hovering a Little