This weeks AI panic has opened up a rare bargain window in big tech names that were disposed of with the DeepSeek bathwater.
Nosebleed Nvidia (NVDA)which we warned about here and hereis a stay away. But there are tech dividends worth exploring, with some paying us up to 13% a year.
Investors have been herded into the same AI and technology names that have been at the forefront for years, andshockinglythose shares have largely been priced for perfection.
Chinese AI upstart DeepSeek has shown that deep pockets are not needed to build smart AI models. This should have come as no surprise, as China is home to many smart technologists. Alas, the NVDA fanboys were stunned and sold immediately.
These panics happen most often when specific stocks are overpriced. The tech sector has long been one of the markets priciest, trading at forward P/Es last seen before the 2022 bear marketwhich were only previously matched in 1999-2004 as the dot-com bubble expanded and burst!
This recent mini-dip has not made the sector-at-large cheap by any means. Instead we should consider lesser-known closed-end funds (CEFs), which allow us to buy many of these same bleeding-edge stocks for less than theyre actually worth.
Better still? They allow us to own them differently, in a way that emphasizes big regular distributions, sometimes as frequently as every month. In the case of these three tech-focused CEFs, thats roughly 6% to 13% in annual distributions.
Columbia Seligman Premium Technology Growth Fund (STK)
Distribution Rate: 5.8%
If you didnt look too closely, itd be easy to mistake Columbia Seligman Premium Technology Growth Fund (STK) with a traditional mutual fund.
A management team featuring Paul Wick, with a whopping 30 years of tech-sector experience under his belt, selects stocks based on rigorous bottom-up fundamental analysis and valuation analysis, using a growth-at-a-reasonable-price (GARP) style to aim for more consistent performance and lower risk than its peers.
The portfolio is a slim 55 stocks70% of them are from within the technology sector, and the rest are tech-esque firms from the communication services, industrial, consumer discretionary and financial sectors. The GARP strategy shows, too, with the portfolio boasting P/E, P/B, and P/S ratios that are significantly cheaper than the category average.
And unlike many CEFs that use debt leverage to add some oomph to their picks, STK doesnt use a dime of itthe assets they have are the assets theyre putting to work.
But you cant own stocks like Apple (AAPL), Broadcom (AVGO) and Lam Research (LRCX) and magically spout out a 6% yield. In STKs case, that distribution rate is a mix of income, return of capital, and capital gains, with some of that generated by a covered call options strategy.
And That Distribution Does a LOT of the Lifting
But you get what you might expect from this Columbia CEFs covered call strategy: On the one hand, it limits upside (STK trails the S&P 500s technology sector by a decent measure over the same time frame), but on the other, youre also getting a little better performance during downswings, market-beating performance, and substantial quarterly distributions.
However, while STKs portfolio is cheaper than your average tech fund, were not getting much of a deal on the fund itselfit trades at just a 1% discount to NAV. Thats better than the 3% premium investors have paid on average over the past five years, but hardly a steal.
BlackRock Innovation and Growth Term Trust (BIGZ)
Distribution Rate: 13.0%
I recently highlighted this fund in a look at the markets highest-yielding CEFs.
The BlackRock Innovation and Growth Term Trust (BIGZ) hones in on innovative mid- and small-cap companies that management determines have better-than-average earnings growth potential. Current top holdings include Taser maker Axon Enterprise (AXON) and tech electrical infrastructure firm Vertiv (VRT), but most noteworthy is that BIGZ can also own private investments you cant own elsewhere (which it folds under cryptic names such as Project Picasso).
BIGZ does use leverage, but minimallydebt leverage is at less than 2% right now.
Instead, this BlackRock CEFs big yield comes courtesy of covered calls. Distributions have historically been entirely made of return of capital. And the fund actually mandates these distributionsits managed distribution plan requires BIGZ to dole out 12% of its 12-month average NAV through at least September 2025.
My colleague, CEF expert Michael Foster, wrote just yesterday that BIGZ was subject to a discount management program where the fund will offer to repurchase shares if its discount to NAV exceeds a certain threshold. However, amid a battle with activist investor Saba Capital Management, the companys board of trustees has extended new tender offers to buy back 50% of BIGZs shares at 99.5% of NAV. This is an aggressive move that could help with the funds persistent discount, which has narrowed to roughly 6%.
Thats certainly helpfulbut its a wide-open question as to whether that will be enough to make up for what has been an extremely disappointing strategy so far.
BIGZ Has Given Investors Little to Love
Neuberger Berman Next Generation Connectivity Fund (NBXG)
Distribution Rate: 9.2%
Thematic funds are typically found in ETF-land, but the Neuberger Berman Next Generation Connectivity Fund (NBXG) is a compelling rarity among CEFs.
NBXG holds stocks that fund management believes to demonstrate significant growth potential from the development, advancement, use or sale of products, processes or services related to the fifth generation mobile network and future generations of mobile network connectivity and technology.
But a quick look at the portfolio shows that, at least as of right now, NBXG is a de facto AI play, too. Nvidia (NVDA). Taiwan Semiconductor (TSM). Amazon (AMZN). Meta Platforms (META). These are just some of the top holdings that have their hand in the AI cookie jar. More broadly speaking, the portfolio is tech-heavy, with some telecoms, consumer discretionary, and other sectors sprinkled in.
NBXG, like BIGZ, offers something that most mutual funds and ETFs dont: exposure to private companies, which make up about 13% of assets right now. And also like both the other CEFs here, a covered-call strategy helps keep an outstanding distribution afloat.
Performance? Well, Neuberger Bermans CEF mirrors the previous two in that it has trailed the tech sector since inception. However, this strategy has shown a lot of promise over the past year, actually exceeding the XLK by an impressive clip.
This Tech Covered-Call Fund Outperformed in an Uptrend
What makes this all the more alluring is that you can buy NBXGs assets for 87 cents on the dollar.
Amp Up Your Dividends With This 11% Payer (Next Payout Drops in Days)
The Next Generation Connectivity Fund doesnt have a long track record, but its showing some promise and it offers a pretty enticing 9% yield.
But we can actually bulk up our average by pairing it with another top-tier CEFone that kicks out a massive 11% dividend, and better still, sends payouts our way every single month.
That means $11,000 in payouts on every $100,000 invested.
Or if you have even a modest $500,000 nest egg to work with, thats a sweet $55,000 in yearly dividends!
Thats not retirement income.
Thats early retirement income!
And with those payouts rolling in every month, the next one is always just a few short days or weeks away.
Which is why Im urging all investors to check out this stout 11% payer now. The longer you wait, the more big, monthly cash payouts youll miss.