Today’s market is ideal for us to grab stock-focused closed-end funds (CEFs) paying outsized dividends of more than 10%. Here are three (of many!) reasons why:
CEFs’ dividend yields are through the roof: As I just mentioned, many equity CEFs pay double-digit yields today. And as members of my CEF Insider service know, most of these sturdy income plays pay dividends monthly.
Deep discounts are everywhere: Of the 447 or so CEFs out there, the average fund trades at a 9.6% discount to net asset value (NAV). That’s near levels we saw in the darkest days of the pandemic! It’s totally overdone, which is why …
Equity-CEF discounts have upward momentum. As you can see in the chart below, the average equity CEF’s discount has bounced from the depths it hit in October. Times like those — when CEF discounts are wide but starting to grind higher — are typically terrific buying opportunities.
I expect this momentum to continue, as it shows that CEF buyers are finally realizing the 2022 sell-off is overdone. And there are plenty of reasons to believe it’s overdone.
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