How To Get 9.9% Dividends (And Upside) From Oil Stocks

 | Jun 25, 2018 06:22AM ET

If you’ve filled up your car lately, I don’t have to tell you that oil prices have come back to life after years in the doldrums.

So today I’m going to give you 3 terrific funds that let you take back the power. Each one pays 6.5%+ dividends and is set to pack big price gains as oil resumes its rise (and it will).

An Income Gusher Where No One Bothers to Look

It’s rare to hear the words “oil” and “6.5%+ dividends” in the same sentence. The truth is, many energy stocks don’t give investors an income stream, while a lot of energy funds are fundamentally flawed. For example, in the last three months, the WTI crude-oil spot price has risen 6.1%, but the oil ETF United States Oil (NYSE:USO) is up just 4%.

Oh, and it pays zilch in dividends.

Which is where the energy funds I’ll show you today come in. Each is well managed and throwing off dividends from 6.5% to nearly 10%. That’s right. We’re talking a massive income stream, along with fast (and lower-risk) price upside.

Plus, these funds are managed by energy experts—and you need experts in the ever-changing world of commodity investing.

What’s more, all 3 of these funds are diversified across hundreds of companies exposed to energy markets around the world. That gives you some nice downside protection if one (or more) of these firms hits a rough patch.

And there’s one other great thing: all 3 of these funds trade cheaper than they’re really worth.

That’s because they are all closed-end funds (CEFs) , a special kind of fund whose market price varies from its net asset value (NAV), or what its portfolio would be worth if it were sold off today. And these 3 CEFs all trade at big discounts to NAV, letting you buy a slew of high-quality assets for much less than you’d pay if you bought each one individually!

So let’s dive in, starting with…

Energy CEF Pick #1: A Long-Term Winner

Let’s start with the “modest-yielding” Adams Natural Resources Closed Fund (NYSE:PEO), a CEF that boasts a 6.5% dividend and is run by one of the oldest CEF managers in the world. Adams traces its history back to the 19th century, but PEO goes back “only” to the 1990s, which still makes it one of the oldest CEFs going.

And over that time, PEO has given investors a solid return—it’s up a nice 265.8% (dividends included) since launch.

PEO Delivers a Huge (Mostly Cash) Gain