There’s a way for us dividend investors to harness the news of a COVID-19 vaccine for huge payouts of 10% and more. And we will also position our portfolios for a sharp rise in prices.
I know the vaccine news sounds like a “horse out of the barn”. After all, the market and shares of vaccine producer Pfizer (PFE) have already erupted (although the rally has taken a bit of a breather lately). But you are not too late. With the three investments I’m going to show you below, you could earn health care dividends that are much larger than the 3.9% Pfizer is currently paying.
A rapid gain for the vaccine manufacturer
Let me say up front that Pfizer is an excellent stock; I have recommended funds that hold it to members of my CEF Insider Service for years. And its price is still good, trading below its January highs, despite its recent surge. But I don’t see why you would buy it now when there are ways to take Pfizer and other stocks into the fight against COVID-19 and collect dividends of up to 9.4% as well.
The key is not to buy stocks ‘directly’, but to do so through closed funds (CEF). Like ETFs and mutual funds, CEFs invest in a variety of assets and pass the profits to you. They are also bought and sold daily on the stock exchange. But unlike ETFs, CEFs pay huge dividends.
While the benchmark healthcare ETF, the ETF Health Care Select Sector SPDR (XLV), reports 1.4% today, the average CEF reports a whopping 7.4%. And there are a handful of healthcare CEFs that make even more money.
Today we’re going to take a look at three CEFs that allow you to jump on the vaccine bandwagon and at the same time get a huge stream of income (at a big discount, in the case of a single fund).
CEF’s # 1 choice in the healthcare sector: this well-known powerhouse provides money every month
You probably know BlackRock. The New Jersey-based asset manager is the largest player in finance, with more than $ 7 trillion under management. Its BlackRock Health Sciences Trust (BME) is a small part of that pie, with $ 508 million in assets, but it’s big enough to make waves in the healthcare market. BME is well diversified between drug manufacturers, medical supply providers, and health insurers.
This fund brings you into this sector without the concentration risk of buying a single stock. The best part is that BME is earning 5.2% and has consistently paid that return for over five years.
Healthcare CEF Pick No. 2: A small fund with a huge payout of 9.4%
BlackRock’s fund is great at what it does, but there is a small CEF manager, Tekla Capital Management, which is interesting because it only invests in healthcare. Tekla employs medical experts, bioengineers, and Ivy League financiers to identify the right companies to buy at the right time. Their Tekla World Healthcare Fund (THW) is worth a visit for this reason alone, but also because its global outlook gives it global diversification. Pfizer is a leading holding company.
Source: Tekla Capital Management
THW has another benefit: dividends, and a lot of them. With a 9.4% return, it provides a massive income stream which is an attractive lure for investors in a world where typical S&P 500 stock pays less than 2%. Like BME, this fund distributes cash on a monthly basis, making it a great income vehicle, in addition to its exposure to healthcare companies that may be more interested in a post-pandemic world that desperately wants to avoid a repeat of 2020.
Health CEF Choice n ° 3: The bargain hunter’s delight
THW is great, but there is an even better Tekla fund: the Tekla Healthcare Opportunities Fund (THQ). Its dividend is a bit lower: 8% instead of THW’s near double-digit yield, but there is a nice side benefit: its price. While THW trades at a small premium to its net asset value (NAV, or the value of its underlying portfolio), THQ trades for 10% less than its portfolio value.
A discount … for now
As you can see, THQ and THW were trading at roughly the same discount to net asset value (NAV, or the value of shares in its portfolio) earlier this year, but investors paid more attention. to THW, tipping the discount of this fund. at a premium, while mostly ignoring THQ.
There aren’t many reasons for this other than the performance of THW. As you can see, THQ’s portfolio is not much different from THW’s, and the same people manage both funds.
Source: Tekla Capital Management
This is a clear opportunity: you can buy THQ now that it trades at a 10% discount, hold it until it trades at the premium THW gets, and then sell for a nice profit. And while you wait, you’ll receive your rich monthly THQ dividends.
Over to you now: my top 5 CEFs for SECURE 8% dividends, quick post-election gains
Buying CEFs at a large discount off the NAV, and then holding onto that discount as that discount soars (spawning a rapid rise in prices like it is!), Is by far the most exciting thing to do. invest in CEFs.
And while you wait, you will quietly be pocketing dividends larger than anything you can find on the market.
S&P 500 stocks? Their average 1.7% payout can’t stand up to the massive dividends you get from CEFs. Treasury bills, which today yield around 0.8%, are even worse!
Which brings me to the other 5 CEFs that I need to share with you now. These are my top picks, paying a sure 8% dividend between them. Plus, my proven CEF pickup system allows them to get a quick double-digit price from here, thanks to their totally bizarre discounts.
I’m talking about 20% gains over the next 12 months, to go along with your rich 8% dividend payouts!
I am ready to share with you all the details on these 5 dumped income games with you now. Go here and you’ll get everything I have on them: names, ticker symbols, full dividend histories and more..
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.