5 Best CEFs For Yearly Gains And Dividends
Contrarian Outlook | Jul 22, 2019 05:25AM ET
Something unusual has happened in service, there are now 36 funds that have delivered over 15% annualized total returns over the last decade, and three have delivered over 20% annualized returns, including their hefty dividend payouts.
And today we’re going to dive into five that have returned 17% and up (annualized) over the last decade. They’re powerful income generators for any market, with monster dividend yields all the way up to 10.5%!
Let’s get started.
Winning CEF #1: Cohen & Steers Quality Income Realty Fund (RQI)
RQI uses investors’ money to build a diverse portfolio of real estate investment trusts (REITs). Top holdings include cell-tower owner American Tower (NYSE:AMT), apartment landlord Essex Property Trust (NYSE:ESS) and senior-center-operator Welltower (NYSE:WELL).
RQI’s REIT-focused strategy has paid off handsomely, putting the fund’s 10-year annualized return at 23.1%.
Big Gains Over the Long Term
Not only has RQI outperformed the S&P 500 index, but it’s also trading at a 2.7% discount to its net asset value (NAV, or the market value of the investments in its portfolio). That makes it more than worthy of your attention now, especially when you factor in its nice 6.8% dividend yield.
Winning CEF #2: Cohen & Steers REIT & Preferred Income Fund (RNP)
On the surface, RNP looks a lot like RQI, but there’s a big difference. Although the same managers oversee both funds, RNP diversifies by mixing preferred stocks and REITs in a single high-income fund.
This strategy gets you exposure to both REITs and financial companies (as financial stocks are the main issuers of preferreds) while giving you a 6.7% yield and a fund that’s returned 21.4% annualized in the last 10 years.
REIT/Preferred-Stock Mix Pays Off
Get The News You Want
While RNP has returned slightly less than its cousin, a big part of its appeal is its discount to NAV, at 6.1%, despite its massive outperformance. RNP looks primed to pop right now.
Winning CEF #3: Neuberger Berman Real Estate Securities Income Fund (NRO)
NRO is another REIT fund from a different management team: Neuberger Berman. As a more conventional asset manager based in New York, Neuberger Berman is well known among the elites and ultra-wealthy. And they do a great job, which is why NRO has returned a solid 19.3% annualized over the last decade.
A Big Gainer—With a Huge Dividend
NRO’s main strength? Income.
With a 9.3% dividend yield, this is a cash machine that can sustain big payouts, thanks to its market outperformance compared to both the S&P 500 and a REIT index fund like the Vanguard Real Estate ETF (VNQ) over the long haul. It also holds a collection of high-yield REITs, such as senior-care-center operators Omega Healthcare Investors (OHI) and Medical Properties Trust (MPW). Plus, at an 8.2% discount to NAV, you can pick up NRO at a bargain.
Winning CEF #4: Gabelli Multimedia Trust (GGT)
Mario Gabelli has made billions for investors over the years using sound investing principles made famous by Warren Buffett. Gabelli uses his deep Wall Street connections and disciplined investing strategy to choose the best media stocks for his Gabelli Multimedia Trust (GGT), which is why it’s up 18.1% annualized over the last decade.
Solid Returns Over the Long Haul
GGT’s 10.5% dividend yield means this fund is a serious income generator, too. That’s driven a lot of investors to jump into GGT over the last few months, placing the fund’s market price right around par with its NAV. But that trend is showing no signs of ending—expect GGT to command a huge premium to NAV in the next few months, just like it’s done several times in the past.
Winning CEF #5: Liberty All-Star Growth Fund (ASG)
While value investing works in the long term, growth investing has been the solid winner over the last decade, for an obvious reason: growth companies have been crowding out fossilized business models with new tech and new ideas. Those are the kinds of companies ASG invests in.
That approach has been paying off over the last decade. Just check out its amazing 17.5% annualized return.
Massive Returns for Growth Bets
Note that ASG is far from its all-time high, even as growth stocks themselves are at all-time highs. This is because a lot of investors sold out of the fund in late 2018, eradicating its premium to NAV, but those investors are trickling back in at a much slower pace. That means more price gains are likely, and you can take advantage of that and ASG’s healthy 7.7% dividend yield while you wait for those gains to appear.
Must Read: This 929% Winner Yields 9% (and it’s still cheap—for now)
I don’t know why anyone would mess around with ETFs paying 2% or less when you can easily bag huge 6%+ payouts in CEFs.
And you may not even have to switch investments to do it!
Here’s what I mean: many folks have big pharma names like Celgene (NASDAQ:CELG), Amgen (NASDAQ:AMGN) or Gilead Sciences (NASDAQ:GILD) in their portfolios now, either owned directly or through an ETF.
I think you’ll agree that these are far from fly-by-night biotech speculations: they’re all established players with market caps of at least $60 billion!
There’s just one problem: ho-hum dividends. The highest yielder of the bunch, Gilead, yields 3.7%. And Celgene pays no dividend at all.
But with a few quick moves, you can hold these very same stocks through my favorite biotech CEF now and get one life-changing “bonus”: a 9% dividend!
This stealth fund is run by a dream team of researchers and financial pros from UCLA, MIT and Harvard who know which pharma companies have the drug pipelines to fuel the next generation of badly needed cures.
This expert knowledge has paid off handsomely for this fund’s investors. Check out the drubbing it’s laid on the market in the last 20 years, with most of that return coming in CASH, thanks to my pick’s huge dividend.
All-Star Managers Lap the Market—Again and Again
I’m ready to reveal the name of this fund and 4 other CEFs ripe for buying now. These 5 critical buys yield 8%, on average, and thanks to their ridiculous discounts, I’m calling for 20%+ price gains in the coming 12 months.
Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, "7 Great Dividend Growth Stocks for a Secure Retirement ."
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