I know I dont have to tell you its tough (and very frustrating) trying to get any kind of income stream from your savings these days.
The average S&P 500 stock yields just 1.9%. Thats not even enough to cover inflation!
Treasuries? The 10-year note yields an almost equally pathetic 2.3%.
But there are still safe 7%+ dividends to be hadeven in the income desert were living in now. Ill show you three funds yielding up to 8.5% (more than 4 times the typical S&P 500 yield) in a second.
Dividends like those can let you clock out on a nest egg thats far smaller than advisers say you need. Im talking $550Kand maybe less. Here are two simple strategies for pulling it off:
Better yet, Ive done the work for you.
Here are three overlooked funds yielding up to 8.5%. All three are what I call pullback proof: they hold the line during corrections like the May massacre we just saw.
High-Yield Pick No. 1: A Preferred 7% Dividend Paid Monthly
My first fund holds preferred shares, which are a perfect substitute for the common shares you probably own today.
A companys preferred stock usually pays a much higher dividend than the common shares most folks buy. So by simply trading in your common shares for preferreds, you can double (or more) your income stream while still investing in the same company.
The tradeoff is usually less upside, but if you buy your preferreds through a well-run closed-end fund (CEF) which I recommendthe cash return from your dividends can be so high you might not even notice.
Consider the Flaherty & Crumrine Total Return Fund (FLC) (payer of a monthly 7% dividend): its delivered a 214% total return (including dividends) since inception in 2003, driven by its huge cash payouts:
A Huge GainMostly in Cash
And talk about pullback proof! Look at how it performed over the past month:
The Ultimate Pullback-Proof Play
And check out the total return FLC has posted since September 20, 2018, when last years collapse started.
FLC Shows Its Mettle
As you can see, the funds return didnt drop nearly as far as the S&P 500 in the meltdown, and shareholders are actually up 10% since that correction started.
Finally, lets talk upside.
With CEFs, the key number to watch is the gap between the funds market price and the value of the assets in its portfolio, known as the net asset value, or NAV.
As I write this, FLCs discount stands at 4%, and its traded at narrower discounts (and even hefty premiums) over the last five years, so we can look forward to price gains as that discount creeps ever closer to parand beyond.
High-Yield Play No. 2: A Top REIT Fund Yielding 7.1%
If your portfolio is low on preferreds and real estate investment trusts, you can grab both in one buy with the Cohen & Steers REIT & Preferred Income Fund (RNP).
RNP has crushed both the S&P 500 and the REIT benchmark Vanguard REIT ETF (VNQ) since inception in 2004no mean feat for an income play like this.
A High-Yield Market Beater
And thanks to its huge dividend (current yield: 7.1%), a huge slice of that gain was in cash.
This fund taps its REIT holdings (51% of the portfolio) and preferred stocks (49%) to give us that steady 7.1% dividend (also paid monthly). And as with FLC, RNP has held up nicely this past month:
RNP Sails Through the May Massacre
Also like FLC, it fell far less than the market during last falls correction, and bounced back faster, handing investors a nice 10% return.
And the Fall Collapse, Too
Finally, you can grab this one at an 8.5% discount to NAV, a discount that cant last, considering RNPs no-drama approach and long history of crushing the S&P 500.
High-Yield Play No. 3: An 8.5% Dividend With Upside
The Western Asset High Income Fund II (HIX) is a high-yield bond fund with a long history of strong performance, having tripled in value (including dividends) since its IPO in the late 1990s, crushing the S&P 500.
This Fund Cant Stop Climbing
HIX gives investors that strong return while yielding 8.5%. Management firm Legg Mason, which has been in the fixed-income business for 48 years, generates HIXs 8.5% dividend through a portfolio that includes emerging-market bonds, high-yield corporate bonds, investment-grade corporates, bank loans and a small cash holding.
That high total return and consistent share-price performance make HIX worth your attention at any time, but now that its trading at a 9% discount to NAV, its particularly compelling.
Thats because the fund has traded near (or even above) par with its NAV for months on end in the past. So if you buy HIX now and wait for its discount to evaporate, youd be looking at 9.9% gains on top of your 8.5% dividend stream.
5 More Pullback-Proof Plays Yielding Up to 9.6%
These three funds are just the start. And to tell you the truth, theyre not even my favorite pullback-proof buys now.
Those would be the 5 stocks in my just-released Pullback-Proof retirement portfolio, including one stocka conservative lender with stellar loan performancepaying a hidden 9.6% dividend.
I say this stocks dividend is hidden because its current yieldthe one youd see on Google Finance and Yahoo Financeclocks in at 8.1%. Thats already massive, but the current yields on most screeners dont account for one critical thing:
Special dividends.
And this REIT has a long history of special payouts. Check it out:
An 8.1% Dividendand More
Add in this companys last special payout, and its real yield pops to that incredible 9.6% I just mentioned.
Heres what that payout means in dollars and cents: if you had $100K in this cash machine, youd get $9,600 back in dividend cash in the past year aloneand I expect a similar total payout this year (this REIT usually rolls out its special dividend in the fall).
And when I say this stout dividend is pullback-proof, I mean it: check out how this stock performed in 2018a year most investors would rather forget:
My Pick Soars in a Rough Year
Thats right: when the rest of the market tumbled, this picks owners actually bagged a near-14% return!
Im ready to share the name of this pick and my 4 other top Pullback-Proof buys with you now.
These 5 reliable CEFs are similar to the 3 funds I showed you above, but with two critical differences: theyre set for stronger price upside (7% to 15% in the next year alone) and faster payout growth, too!
And youre about to get the full story on each of them.