High-Yield Dividend Investments Amid Economic Slowdown
2 min read
Image: Economic slowdown and high-yield dividend investments
The article discusses the potential for high-yield dividend investments amid an economic slowdown. The author highlights the importance of locking in high dividends before they decrease in value, using the example of a missed opportunity to refinance mortgages at a lower interest rate.
The article suggests that the current economic slowdown may lead to a decrease in Treasury rates, which could cause investors to shift their focus from dividend stocks to Treasury bonds. However, the author argues that this trend is temporary and that investors should take advantage of the current high dividend yields before they decrease.
To capitalize on this opportunity, the author recommends investing in closed-end funds (CEFs) that offer high dividend yields and are trading at a discount. Two specific examples are provided:
1. Nuveen NASDAQ Dynamic Overwrite Fund (QQQX): This CEF holds the same stocks as the Invesco QQQ Trust (QQQ), which tracks the NASDAQ. However, QQQX generates a higher yield through a combination of income from its portfolio and a covered-call strategy. The author notes that QQQX currently trades at a discount, making it an attractive investment opportunity.
2. Eaton Vance Tax-Managed Diversified Equity Income Fund (ETY): This CEF focuses on high-yielding stocks and has outperformed the S&P 500 index over the past three years. ETY also uses a covered-call strategy to generate income and currently trades at a discount.
The author emphasizes the importance of considering these investments in the context of an economic slowdown and suggests that they may provide a safe haven for investors due to their covered-call strategies.
In summary, the article encourages investors to take advantage of the current high dividend yields by investing in CEFs that offer both high yields and discounted prices. These investments may provide a stable income stream and potential for capital appreciation as the economy recovers.
