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2 Perfect Post-Midterm Funds for 8% Dividends and Upside


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By Michael Foster

IaEURtmm sure you noticed that when America decided on a Republican-majority Senate and Democrat-majority House, the markets jumped.

The best news: itaEURtms just the beginning of whataEURtms likely to be a long-term uptrend in stocks. So if you sold during the recent market panic, youaEURtmre going to miss out on that upswingaEUR"that is, unless you buy now.

But what to buy? While the SPDR S&P 500 ETF ( SPY ) is already up 3.6% since the end of October, it still has gains ahead because of slower investors who havenaEURtmt come back into the market A after last monthaEURtms panic selling. If you buy now, you might beat a lot of them to the punch.

But I have a better idea.

Instead of getting SPY, you could buy the Nuveen S&P 500 Dynamic Overwrite Fund ( SPXX ) , a closed-end fund ( CEF ) that owns the same stocks as SPY but pays a whopping 7.1% dividend, which is obviously a lot better than the 1.8% payout SPY gives you.

ThereaEURtms another nice thing about SPXX: itaEURtms not trading at a big premium for the first time in a while .

Granted, itaEURtms technically still at a small (0.2%) premiumaEUR"but keep in mind that this is a CEF thataEURtms often traded at a much bigger premium to its net asset value, or NAV (the real mark-to-market value of its portfolio) over the last couple years. As a result, its current market price sits near levels we havenaEURtmt seen since the middle of 2017, in relation to its NAV:

A Premium Fund Goes on Sale


Why has this premium all-but disappeared all of a sudden? ItaEURtms simple: with the market panic, the recent heavy investment in SPXX went with itaEUR"but that investment is about to come back.

The reason why? Volatility.

You see, SPXX not only buys S&P 500 stocks, but it also sells call options (a type of derivative used by professionals as a kind of insurance on their portfolios), which are the main source of that 7.1% income stream.

The income it gets from selling these options rises with volatility. Below, you can see the market jumping into SPXX, driving up its premium to NAV, when the VIX, a measure of how much volatility investors expect, rose at the start of 2018:

Market Instability Creates Demand for SPXX


Notice how the fundaEURtms premium has evaporated but volatility has recently spiked? ThataEURtms a market inefficiencyaEUR"investors havenaEURtmt realized that this fund has an extremely safe income stream because of recent volatility, in addition to capital gains potential from its portfolio of stocks rising with the broader market.

SPXX isnaEURtmt the only fund you should consider now.

ThereaEURtms also the PIMCO Dynamic Income Fund ( PDI ) , which has given investors a shocking return since inceptionaEUR"a whopping 188.2% in just 6 years!

PDI Crushes the Market


Not only is that much bigger than the S&P 500aEURtms still-impressive 125.3% return over the same time period, but PDI has also thrown off an 8.2% dividend yield that has been increasing in recent years.

A high yielder thataEURtms beating the market and growing payouts? WhataEURtms the catch?

IaEURtmll be honest with you: the catch is fear. PDI doesnaEURtmt invest in stocks; it taps PIMCOaEURtms crack team of analysts to invest in the most oversold mortgage-backed securities (MBSaEURtms). If you saw The Big Short, you know that MBSaEURtms were the derivatives behind the Great Recession.

Because of that, the much safer MBSaEURtms that survive today have been undersold by a market suffering from recency biasaEUR"that is, the tendency for investors to think the next crisis will look like the last one, even though thataEURtms never the case. Because of a stronger economy, tougher banking regulations and much better lending standards, the MBS apocalypse of last decade is unlikely to happen again.

But few investors are thinking rationally enough to pick up MBSaEURtms, which has been an opportunity PIMCO has been exploiting for yearsaEUR"and PDI shareholders have been reaping the benefits.

Why These Funds?

These are nowhere near the only 2 funds out there for investors to pick up for a massive income stream and strong returns. Because of the marketaEURtms recent panic, there are literally dozens of funds likely to provide double-digit capital gains in a matter of weeks.

If youaEURtmre wondering why IaEURtmve zeroed in on these two funds out of those dozens, itaEURtms because IaEURtmve picked these funds before, and now is a great time to loop back on them.

In fact, I most recently recommended SPXX on November 1st , at the end of the October selloff, and I recommended PDI on October 22nd , when the market was still in the middle of its hysterical panic.

And since I recommended both funds, theyaEURtmve begun to recover. PDI, for example, dipped shortly after my October 22nd call but has recovered to gain 1%. Since itaEURtms clear that this fund has a lot more room to go before the market rebound has played itself out, now is just as good a time as last month to get into this misunderstood quality dividend grower.

As for SPXX, itaEURtms already up a nice 6.3% since my recommendationaEUR"a massive return for just about a week!

SPXXaEURtms Recovery Has Begun


Fortunately itaEURtms not too late here, either. But you may not have much time left on either of these funds; markets tend to rally after an election when they were correcting before the results were known, which sets us up for strong returns, starting now.

5 Screaming Post-Midterm Buys for 8%+ Dividends and 20%+ Gains

The truth is, with the midterms out of the way, all the pieces are in place for a strong market rise in 2019.

If you donaEURtmt believe me, consider the latest from Yardeni Research, which tells us that Year 3 of a presidential term (which starts in January) is by far the most profitable, with an average 12.8% gain on the year.


Source: Yardeni Research

The best way to tap into these gains? CEFs, of course! And you know me: IaEURtmve got 5 hand-picked buys for you , throwing off an average 8% dividend yield now.

That incredible 8% dividend is more than just an income streamaEUR"itaEURtms a critical safety cushion for your nest egg.

Because you and I both know that even if markets do bag a double-digit gain next year, as our Year 3 trend suggests, there will be plenty of ups and downs along the way. But because youaEURtmll get a big slice of your gain in cash dividends, you wonaEURtmt have to worry about any of that.

You can simply pocket your dividend checks while you wait for tranquility to return!

And these fundsaEURtm massive payouts arenaEURtmt your only safety valve. Each one also boasts an outrageous discount to NAV that just canaEURtmt last. As these markdowns slam shut, IaEURtmm expecting 20%+ price upside from each and every one of these 5 funds.

Add in their outsized 8%+ dividends, and youaEURtmre looking at a 28%+ windfall here!

But you must act now. With the midterms in the rear-view, these 5 buys are already starting to tick higher, and I donaEURtmt want you to miss your chance.

Click here to get full details on all 5 of these cash machinesaEUR"names, tickers, buy-under prices and everything you need to know to kick-start your 8% cash stream today .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Options
Referenced Symbols: SPY , SPXX , CEF , PDI



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