Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

3 “Hot Potato” Fund Buys For A Quick 10%+ Cash Stream

By Contrarian Outlook (Michael Foster)Stock MarketsJul 29, 2021 05:32AM ET
3 “Hot Potato” Fund Buys For A Quick 10%+ Cash Stream
By Contrarian Outlook (Michael Foster)   |  Jul 29, 2021 05:32AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

These days I hear from a lot of CEF investors who are struggling to dig up cheap dividends. If you’re one of these folks, I get it. In fact, I’m right there with you!

Even for those of us who spend our entire day looking for CEF bargains, this market’s been a grind, making it tougher than ever to find high, reasonably priced dividends to recommend to you in CEF Insider.

(But we’re not out of luck here. Today we’re going to look at three 10%+ yielders that would make good speculative plays now, beyond the 13 attractively priced buy recommendations in our CEF Insider portfolio, which I continue to recommend for the lion’s share of your CEF investments.)

From CEFs To Lumber—High Prices Are Everywhere

The reason for high prices in CEFs is the same as it is in stocks, real estate, lumber, bicycles, microchips—you name it: surging demand. Check out this list of the major CEF indexes we track in CEF Insider:

CEFs Take Off


Source: CEF Insider

As you can see, every single one of them is up by 10% or more, with the buy-write subindex (which tracks equity CEFs that generate extra income by selling options on their portfolios) up nearly 20%. Those are big moves for relatively stable income-producing investments like CEFs.

Discounts, Dividends Grind Lower—But Buys Are Still Out There

That fast swing up has slashed CEF discounts to net asset value (NAV, or the value of the stocks and bonds in their portfolios) to the lowest levels I’ve ever seen: just 1.8% as I write this.

CEFs’ swelling prices have also whittled away their yields. Over the decade I’ve been tracking CEFs, their yields have averaged between 6.8% to 7.2%. As of July 23, 2021, the average CEF was paying out 6.1%. That’s still high by the standard of S&P 500 stocks (which yield a pathetic 1.3% today) but it’s a low-water mark for CEFs.

For those of us who have been investing in CEFs for years, this is all great; we’re profiting from the Johnny-come-latelies, and will continue to do so.

And there are still opportunities out there. Which brings me back to those three more-speculative CEFs I mentioned off the top.

But These 10%+ Yielders Are Still Available

1. Clough Global EF

Let’s start with the Clough Global EF (NYSE:GLQ), which invests its $202 million in assets in a variety of stocks that are perfectly positioned for a reopening American economy, with Booking Holdings (NASDAQ:BKNG) as its largest position, followed by Royal Caribbean Group (NYSE:RCL), Carnival Corporation (NYSE:CCL) and First American Financial (NYSE:FAF), which is already benefiting from heightened demand for single-family homes (FAF offers title insurance for homebuyers).

A broader shift into these stocks has driven GLQ higher this year, and they have room for further gains as more of the world gets vaccinated.

Strong Gains for 2021


GLQ delivers a large portion of its profits to investors as dividends, with a 10% yield that’s well ahead of the CEF average of 6.1%.

2. Clough Global Opportunities Fund

For another almost-10% yielder, let’s look to GLQ’s sister fund, the Clough Global Opportunities Fund (NYSE:GLO). The two funds’ holdings are broadly similar, but with one key difference: GLO is more aggressive. While GLQ holds nearly 10% of its assets in cash and US government bonds to provide some liquidity in case of a crash, the 9.9%-yielding GLO goes all in on assets that can maximize returns. That’s driven its near-20% gains so far this year.

GLO’s Aggressive Approach Pays Off


That means this $404-million fund is earning nearly twice its dividend, making payouts safe for now.

3. Guggenheim Credit Allocation Fund

Rounding out our double-digit-yielding portfolio is the pint-sized Guggenheim Credit Allocation Closed Fund (NYSE:GGM), a $209-million CEF that uses its small size and institutional heft to invest strategically in places bigger funds can’t.

Here’s what I mean: GGM can lend money to small companies like Cengage (CNGO) when they want to issue debt, something bigger bond funds simply can’t do, since small firms’ bonds won’t move the needle for them. In addition, GGM’s management firm, Guggenheim, boasts $270 billion in assets under management, making it a big player in the markets, ideally positioned to find small opportunities it can then pass off to this fund.

That is how GGM affords to yield 10.3% and gets investors profits like this.

A Strong Showing


That 15% year-to-date return more than covers GGM’s dividend for the year, and its small-fund-with-big-fund advantages position it to keep paying those big dividends for a long time to come.

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."

3 “Hot Potato” Fund Buys For A Quick 10%+ Cash Stream

Related Articles

JFD Team
Hang Seng Heading for a Lower Low? By JFD Team - Sep 24, 2021

Hong Kong’s Hang Seng traded lower yesterday after meeting resistance at 24805 levels. Overall, the index remains below the tentative downside resistance line drawn from the high...

3 “Hot Potato” Fund Buys For A Quick 10%+ Cash Stream

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email