There’s one income-producing sector you probably hold in your portfolio—and you may be wondering why it’s crashing out this year.

I’m talking about utilities, which are famous for their rock-steady dividends (and predictable dividend hikes). These companies literally power the economy. But if utilities are so important, why are they in the toilet while the rest of the market is on fire?

Investors Loathe Utilities

Before we go further, if you’ve noticed your portfolio’s utility sleeve taking a dive like the one above—or bigger—don’t worry. This dip is a buying opportunity! I’ll give you one option paying a fat 8.7% dividend below.

First, the big driver behind utilities’ plunge is the recovery in energy prices. Oil and natural gas are soaring after 2017’s bear market and the cold snap that kick-started this year’s commodity consumption. Higher energy costs hurt utilities’ profits, which, in turn, lowers their stock prices.

The Upside of Down

But if you’re an income seeker, this crash is an excellent opportunity to bulk up your income stream. Consider the Utilities Sector SPDR ETF (XLU), which is now yielding 3.5%, its highest level in over a year:

Utilities’ Income Rises

Let’s put some numbers behind this to understand what’s going on.

If you put $500,000 into XLU at the start of 2018, you would have gotten a $16,500 annual cash payout from the fund’s then-decent 3.3% dividend. But if you buy XLU today, you’ll get $17,350—a 5.2% raise! And that’s just because of a 0.2% increase in yield.

That is the power of dividends. And now I’m going to show you how we can kick that payout into overdrive.

Double Your Income in One Buy

There are a lot of funds out there paying a 6% dividend yield, or higher, while still investing in those same utilities XLU does. They’re called closed-end funds (if you’re not familiar with CEFs, click here for a quick and easy-to-follow primer), and they operate in an important way that supercharges their income stream.

The secret? Discounts.

When you buy $1 in XLU shares, you get $1 of XLU’s portfolio. That’s pretty straightforward. But CEFs are different: they often trade at a discount to their portfolio’s net asset value (NAV, or the market value of their holdings). And that makes their dividend yield even higher.

For instance, the Duff & Phelps Global Utility Trust (DPG) trades at an 11.5% discount to NAV—or its “true” value—which helps it cover a nice 8.7% dividend to shareholders.

Now let’s put some numbers behind this to see what we’re talking about. That $500,000 investment in XLU that paid $16,500 in annual cash dividends? Put it in DPG and suddenly you’re getting $43,450 a year. That’s a 163% raise!

Think there’s a catch? Let me put your mind at ease.

One of the first things investors do when they hear about a CEF is track its performance history. Do this with DPG, and things look bad. Let’s compare the price charts of DPG and XLU over the last year:

The Seeming Laggard

XLU is up nearly 4% while DPG is flat—a sucker’s bet, right?

Wrong.

The mistake most folks make is to look just at the price return of a fund and not the total return, including dividends. That’s because the media has trained us to obsess over the S&P 500, the Dow Jones Industrial Average and the Nasdaq 100—indexes that pay paltry dividends (you’ll get 2% on the S&P if you’re lucky). Paltry dividends don’t add much to total returns, which are the value of the dividend payouts and the price changes.

But CEFs typically yield 6% or more, so their dividends are a much more important component of their total returns. So now let’s look at a total return chart of DPG and XLU, including the dividends both funds paid out:

Laggard No More!

All of a sudden, DPG doesn’t look like a sucker’s bet anymore.

It’s a chronic problem with markets—a lot of investors do the most basic amount of research and give up. What exactly are they giving up? In this case, a 163% higher dividend, along with superior returns. If that isn’t a good enough reason to do deeper research, I don’t know what is.

So should you buy DPG now?

If you’re looking for a big income stream and you’re in it for the long haul, DPG is a good option. There are others, though. Some utility CEFs have bigger yields, and some have much better long-term returns than DPG. A basket of these funds, bought when their discounts are most attractive and their portfolios best positioned to guarantee their dividends, is ideal for most investors.

But, of course, as you’re shopping around for the right CEF, do make sure you look at total returns.

4 Better Buys Than DPG (Incredible Cash Payouts Up to 10.4%)

And I haven’t gotten to your best option yet: let me do the legwork for you.

In fact, I’ve already done it! And today I’m pounding the table on 4 bargain CEFs that hand you an average yield of 8.1% and even bigger upside (I’m talking gains of 20%+ here) than you’ll get from DPG in 2018.

One of these little-known picks hands you an astounding 10.0% payout and I expect it to be one of my biggest gainers in 2018, thanks to its massive discount to NAV. Just imagine banking an income stream like that while you watch your nest egg streak higher.

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook 

The S&P 500 has already increased in value by over $1 trillion in 2018—and January isn’t even over yet!

What’s behind this incredible bull market isn’t euphoria or hysteria—it’s actually sound investing principles. As I wrote in a January 18 article, the bull market is being driven by the best possible trend: higher earnings and sales for America’s best companies, which is itself the result of improving economic conditions for everyday Americans.

Parties ultimately end, of course. And this one is no different—the bull market is being driven by a solid and reasonable belief that American companies will go up in value. But eventually that sound line of thinking will turn into a euphoria that creates a bubble—then a crash.

Fortunately, we aren’t there yet, and we probably won’t be for a couple years or so. Unfortunately, though, we are seeing some foolish investing decisions being made as a result of naive first-level thinking.

Today I’m going to show you 2 common mistakes—and 2 investments—that have captured the herd’s attention for all the wrong reasons. Read on to learn more about them, and how you can steer clear.

Mistake #1: Buying on Dividend Yield Alone

The Eagle Point Credit Company (ECC) pays an outsized 13% dividend yield as I write this and makes a simple claim: that its financial professionals know how to make money from obscure and complicated investments.

But that’s not the whole story.

It’s true that ECC is one of the biggest investors in collateralized loan obligations (CLOs), and it’s true that CLOs are very complicated. You can think of CLOs as derivatives that are a lot like the mortgage-backed securities that were at the heart of the financial crisis; ECC claims to understand these assets and can make a profit accordingly.

The real problem, though, is ECC’s sky-high fees.

Last quarter, ECC reported a 10.7% expense ratio. In other words, for every $1.00 in assets the company has, it takes out 10.7 cents per year in fees. ECC needs to make a 10.7% profit on its investments just to pay its managers—before shareholders get a penny!

Of course, before many folks even get to the fees, they see the juicy dividend yield I mentioned earlier, which has ranged to nearly 15% so far this year, and hit the buy button.

Juicy Income—At First Glance

Trouble is, that sky-high yield is because the stock’s price keeps falling.

ECC Not a Grower

Notice the huge drop in price over the last week? That’s because ECC issued new shares, diluting current investors’ ownership. Why would ECC do such a thing? They may want to release more shares to make more aggressive bets in the CLO market. It’s also true that more shares translates into more assets to manage, generating more fees for ECC.

This is definitely an investment to avoid.

Mistake #2: Ignoring History

It’s true that history doesn’t repeat itself, but it does rhyme, and in financial markets, rhymes on historical events are sometimes all the signal you need to stay away.

This is the case with Prospect Capital Corporation (PSEC).

I haven’t talked about this stock in over a year, because it was pretty clear that Prospect’s past mistakes were recurring, and that meant we would see the same chain of events as in yesteryear.

And that’s what 2017 delivered.

Let’s back up. PSEC is a business development company (BDC) that’s structured to give most of its income to shareholders. That’s why PSEC yields over 10% right now.

There are just a couple problems.

For one, the BDC world is getting extremely crowded. BDCs are a good idea—they pool together a lot of money from investors and then lend that money out to small and medium-sized businesses that can’t get loans easily from banks.

But BDCs are such a good idea that a lot of new ones have opened up in the last few years. It’s an easy way to make money if you have connections and access to capital, so the barrier to entry is low. That crowdedness has also resulted in profit margins shrinking for BDCs, in turn lowering the income most BDC shareholders have access to.

Meantime, the extremely illiquid portfolios that BDCs hold are nearly impossible to sell in a market panic, which further boosts their risk.

Those two reasons alone are good motivation to stay away. But many investors ignored them in the first couple months of 2017, which is why PSEC did this:

A Crowded Trade

If you were playing PSEC for the short term, this was great. Most PSEC holders aren’t, though—they buy for that 10%+ dividend and hold forever. Which is why PSEC shareholders aren’t happy now, as you can see from this chart:

A Steep Drop

Not only has PSEC’s price crashed since its big early 2017 run-up, but its dividend has been slashed by 28%, as well. Note that the majority of the price crash happened before the dividend cut. The market isn’t clairvoyant—but a lot of investors who looked closely at PSEC saw that its dividend coverage ratio had fallen below 100%, and it could no longer afford to pay its high payout to shareholders.

This wasn’t a shock; Prospect had the same problem in 2015. And it will have this problem again and again and again … causing the stock to keep crashing and the income stream to keep shrinking.

2 Takeaways to Protect and Grow Your Nest Egg

What can we learn from these 2 examples?

First, be suspicious of high dividends. While 7% or 8% yields can be sustainable in many cases, it’s very rare (but not impossible, as I’ll show you in a moment) for a 10% yield to be sustainable. The higher the yield, the more need for a careful analysis of how sustainable that dividend really is.

Second, we need to pay attention to history. Investors who took the time to look just a couple years back into Prospect Capital’s past knew to stay away.

The third, and perhaps most important, lesson relates to complexity. Some financial advisors urge clients to avoid investing in anything they don’t understand. This is silly. None of us really understand what goes into our iPhones, but that hasn’t stopped Apple (AAPL) from soaring.

Companies that produce financial products are no different. They provide a value and a service, and investors can profit from them even if they don’t understand the technicalities.

However, we must be able to identify and quantify the value a company provides, and how that value is changing. The real problem with ECC isn’t that its business is too complicated—it’s that ECC’s management earns too much money by charging shareholders for their services.

The bottom line? Find companies and funds that have management teams whose interests align with yours, a history of making the right decisions and a structure that rewards shareholders more than managers. When you do, you’ll find that massive profits come your way.

Michael Foster has just uncovered 4 funds that tick off ALL his boxes for the perfect investment: a 7.4% average payout, steady dividend growth and 20%+ price upside. — but that won’t last long! Grab a piece of the action now, before the market comes to its senses. CLICK HERE and he’ll tell you all about his top 4 high-yield picks.

Source: Contrarian Outlook 

Investors in high yield InfraCap MLP ETF (NYSE: AMZA) were shocked to get the news of a 36% dividend reduction. Fortunately, there is no reason to panic, and there are some good lessons to be learned from the past and future history of AMZA.

AMZA is an actively managed exchange traded fund that owns a portfolio of publicly traded master limited partnerships (MLPs). The MLP sector is known for high current yields. The AMZA management boosted the fund’s income with call options selling. A $0.52 per share quarterly dividend had been paid since the start of 2016. With the fund’s shares trading between $7.00 and $11.50 over the last two years, the result was a yield in the high teens to mid 20% range.

On Friday, January 19, the fund management company announced the dividend would be switched to a monthly payment of $0.11 per share. This lowers the annual dividend amount to $1.32 from the previous $2.04. This was a prudent move by management to keep the dividend stable as the fund continues to go through significant growth pains. Instead of going deeper into the reasons for the dividend change, I want to cover some lessons learned.

Lesson 1: An ETF is not a stock. I received a lot of questions asking if the AMZA share price would drop due to the dividend cut. That typically happens with a company cuts its dividend. However, as an ETF, the AMZA share price is not determined by investor sentiment. The share price is a mathematical calculation of the value of the portfolio divided by the number of shares held by investors. AMZA moves up and down generally along with the overall MLP sector. It does not matter to the share price whether the dividend has been cut.

Related: The Safe Monthly Dividend Stock to Buy and Hold Forever

Lesson 2: Compound reinvestment of a high yield security is a very powerful wealth building strategy. If you look at theis price chart showing the Alerian MLP Index and AMZA over the last two years, it looks like it would be impossible to have gains in the MLP sector over the full period. MLPs went through a steep correction to start 2016 and then a bear market that lasted most of 2017.

Yet, if you took those big dividends from AMZA and bought more shares, you would now be well ahead. Here is the math. One thousand shares purchased at the start of 2016 cost $11,200. If the dividends were reinvested at a price near the ex-dividend date price each quarter, the quarterly dividend payments would have grown from $520 paid in January 2016 to $777.92 earned in January 2018. Total dividend earnings were $5,763. Reinvesting those dividends resulted in a current total share count of 1,587. At the current share price of $8.88, those shares are worth $14,093. Through an ugly stretch for MLPs, the investment grew by 26%. At the new, lower dividend rate, the current number of shares will generate about $175 in monthly income, an 18% yield on the original investment amount.

The next step is to get a sustained uptrend from MLPs, and it looks like one started in November 2017.

Lesson 3: If you are an income investor, don’t focus on the share values in your brokerage account. Keep track of your dividend income, reinvest some or all that income and over time your income stream and account value will grow. It’s powerful math that is not obvious when you look at share prices and price charts.

AMZA has entered a new phase in its life, and I am excited to see where it goes from here. The yield is still a high 15% and the MLP sector fundamentals are the strongest they have been since 2014.

At least several times a week, I get a note from a newsletter subscriber or other investor who has heard a stock market correction or bear market is coming soon. The next statement is that the investor either plans to sell his stocks until prices drop or wait for the prices to drop before buying into any stocks. Like many commonly held beliefs about investing in stocks, this is one that is likely to cost the investor a lot of money.

Here are a couple of reasons why selling to avoid a market correction or waiting for one to buy will cost an investor money.

Reason 1: No matter what you see or read in the financial news, the next bear market does not appear to be imminent. The main reason to forecast an approaching bear market is because it has been almost nine years since the end of the last one. This logic doesn’t work because bear markets do not follow a calendar. Ten of the last 12 bears have been associated with an economic recession. The current economy gives zero indication that the next recession is on the horizon. History tells us that the economy will at some point go to negative growth, but currently there are none of the usual indicators for a pending economic downturn.

A stock market bear market is arbitrarily defined as a 20% decline from the most recent high. While the last decline of this magnitude occurred in 2008-2009, there have been several “near bear” corrections since then. Here are the three significant corrections that occurred during the current bull market:

• 2010: 16% decline
• 2011-2012: 19.4% decline
• 2015-2016: 14.3% decline

These corrections have acted as circuit breakers that keep the current market values from a place where a big drop is likely just to take off some of the froth. While it is likely that a correction will occur within the next year (they happen on average once a year), a true bear market is very unlikely.

Reason 2: History shows that getting out of the market too early costs you more than riding out corrections and bear markets. Here are some averages on the 12 bear markets since 1937.

• The average decline was 35.5%.
• Average duration from market peak to bottom of 13.8 months.
• Typical decline of about 20% in the first year.

The interesting additional data is that the two years leading up to the bear markets are, on average, the years with the biggest bull market gains. In the two years before the start of the bear markets, the S&P 500 climbed by an average 58% plus dividends. In the final year before the peaks, the average gain was 25% plus dividends. Comparing the numbers, even if you hold on through the average bear market, owning the stock averages for the two years prior to the start of the bear market leaves you with a larger portfolio value than if you had stayed out of the market and had perfect timing to get back in when the bear hit bottom. The not obvious lesson is that getting out too early can cost you more wealth than staying in through part or even all the bear market.

One feature of my dividend focused strategies is that they rule out the need to try to time when the next bear market or correction will start. I can more accurately predict dividend payments than I can swings in the stock market. My strategies focus on finding dividend stocks with a high degree of confidence in the ongoing dividend payments and buy those stocks to build a growing income stream. If the market declines into a correction or bear market, dividend earnings can be used to buy shares at lower prices boosting both the dividend stream and the capital gains when the market starts the recovery or next bull market. A dividend focused investment strategy allows you to take advantage of the proven techniques of dollar cost averaging and to buy low when fearful investors have panicked.

I recommend that income investors focus on building a portfolio of dividend stocks that balances high yield stocks with those where dividend growth is very predictable. Here are a pair of income stocks that illustrate this combination.

Hercules Capital Inc (NYSE: HTGC) is a business development company (BDC) that makes loans in in the venture capital space. Hercules client companies are growth businesses backed by venture capital investors that need additional capital to fulfil their growth and investment goals.

Loans from Hercules provide debt capital that does not dilute the equity holdings of investors and insiders. Hercules typically receives some sort of equity stake or warrant, so generates additional profits when a client company gets bought out or enters the public markets with an IPO.

This BDC has paid a steady, well covered by cash flow dividend for over five years. The shares currently yield 9.5%.

EPR Properties (NYSE: EPR) is a very well-run net lease REIT that has done a great job of growing the business and generating above average dividend growth for investors. With the net-lease (NNN) model, the tenants that lease the properties owned by EPR are responsible for all the operating costs like taxes, utilities and maintenance. EPR’s job is to collect the rent checks. Typically, NNN leases are long term, for 10 years or more, with built-in rent escalations.

EPR Properties separates itself from the rest of the triple net REIT pack by the highly focused types of properties the company owns. The EPR assets can be divided into the three categories of entertainment, comprised of movie megaplex theaters; recreation, including golf and ski facilities; and education which counts in its portfolio of properties private and charter schools, and early childhood centers.

EPR has generated superior returns for investors by growing its dividend an average of 7% per year for eight straight years. The shares yield 6.8%.

t will take some time for investors to figure out all the investment related ramifications of the new income tax rules. Master limited partnership (MLP) focused funds are one asset class that will see a major benefit from the tax overhaul. Because they are forced into a different business structure, a fund with MLP assets of more than 25% will get the benefit of the corporate income tax reduction from 35% down to 21%. It’s a big deal.

The typical stock funds, including mutual funds, exchange traded funds (ETFs), and closed-end funds (CEFs), are formed and operated as Registered Investment Companies. The Investment Company Act of 1940 allows a fund to operate as a pass-through entity. This means the fund must pay out all portfolio income and realized capital gains as distributions to the fund investors. The fund does on pay income tax on the portfolio earnings. The tax characteristics of the income and capital gains are passed through to the fund investors.

The exception against a fund being able to operate as a registered investment company is if the fund’s portfolio holds more than 25% of its assets in MLPs. If that is the case, the fund will instead be organized as a C corporation and be liable to pay corporate income tax on the portfolio’s income and capital gains. Most of the MLP focused mutual funds, ETFs and CEFs have more than 25% MLP holdings and are organized as corporations.

In practice, here is how the corporate income taxes affect the returns of an MLP fund. Individual MLP distributions are classified as return of capital, so the dividends earned by MLP fund investors are typically mostly ROC. Profits and losses at the MLP level are reported to the fund on a Schedule K-1, and the fund will pay corporate income tax on profits or accumulate credit for the K-1 losses. If the portfolio’s MLPs go up in value, a fund will also occur an income tax liability on the capital gains. MLP funds account for the income taxes on gains in the fund net asset values (NAVs). The NAV is what each share is worth. Actual paid income taxes show up in a fund’s expense ratio. Which is why you sometimes see very high expenses reported by the MLP funds.

The corporate tax rate reduction will result in lower tax expense, and higher net returns for MLP fund investors. Consider this example. The MLPs in a fund’s portfolio go up by 10%. With a 35% corporate tax rate, the fund will have to account for the tax liability in the fund’s NAV, which means the share value will only go up by 6.5%. With the new 21% corporate tax rate, the hit to NAV will be lower, and the share value will go up by 7.9%. The new, lower corporate tax rate means that MLP fund investors will see over 20% higher gains when MLPs are rising compared to the 35% tax bite. The lower tax rate has already started to help MLP fund values. On December 26, the First Trust MLP and Energy Income Fund (NYSE: FEI) announced a NAV adjustment due to the fact it could lower the accrued tax obligation in the fund’s portfolio. The FEI share price was instantly increased by $2.016 or 8.75%. A good deal for investors. The adjustments for taxes on past gains will be one-time benefits for shareholders. However, the new corporate tax rate will provide ongoing increased profits as MLP values rise in the future. After a 2 ½ bear market, the MLP sector fundamentals are solid and with rising crude oil price, I expect the sector to do well in 2018.

Here are the three largest MLP closed-end funds. They all provide professionally managed exposure to the MLP sector.

Kayne Anderson MLP Investment Company (NYSE: KYN) has $3.25 billion in assets. The fund currently trades at a 1.5% premium to NAV and yields 9.5%.

Tortoise Energy Infrastructure Corp. (NYSE: TYG) has $2.1 billion in assets. The TYG share price is at a 3.4% premium to NAV. The fund yields 9.1%.

ClearBridge Energy MLP Fund Inc (NYSE: CEM) is a $1.6 billion assets fund. The CEM shares are currently at a 3.5% discount to NAV. This fund yields 9.5%.

We’ve put together our most comprehensive, step-by-step dividend plan yet. In just a few minutes, you will have a 36-month roadmap that could generate $4,804 per month for life.

It’s the perfect complement to Social Security and works even if the stock market tanks.

If there’s one thing I love, it’s picking up on a “sleeper” income opportunity that first-level investors have walked right past.

And today I’m going to show you not one but three. And one of these stealth buys yields a safe, stable 9.5%.

So a $100,000 investment in this unloved fund would hand you a nice $9,500 in 2018, or a steady $2,375 when its dividends drop into your account every quarter.

I’ll have more to say about these 3 funds—all of which are managed by a real, live human—shortly, including why they’re a better way to go than a “dumb” index fund.

But right now, I will reveal that all 3 of these funds are in the utilities sector, which has itself been a sleeping giant in 2017. Even the “dumb” utility index fund, the Utilities Select Sector SPDR (XLU) has had a terrific year!

Utilities Pop in ’17

Note the two different numbers here. The blue line is XLU’s market price, or how much the price of a share has changed in 2017. The orange line is the total return price. As you can see, that’s a good 3.7 percentage points higher.

Why? Because a lot of XLU’s returns come in the form of dividends.

The fund’s 3.1% yield is high by today’s standards, but the nice thing is that utilities raise their payouts in the long run. That’s why XLU’s dividends did this in the last 20 years:

Payouts Keep Rising

This soaring dividend is possible because the companies XLU holds keep raising their payouts to shareholders. Take a look at this chart showing the dividends of the 3 biggest utility firms in America: NextEra Energy (NEE), Duke Energy (DUK) and Dominion Energy (D):

Payouts Rise—But the Ride is Bumpy

Notice how Duke Energy’s dividend actually collapsed in the mid-2000s? This isn’t because of a crisis in the utilities industry. This was a case of mismanagement—and that’s why picking individualutilities is risky.

It also shows the drawbacks of investing in utilities through an index fund like XLU. Because Duke is such a massive utility, the fund had to include the company in its portfolio, even if XLU’s managers thought it might run into trouble.

Luckily, we’ve got a third option: the 3 actively managed, utility focused closed-end funds (CEFs) I’ll show you now. Each one has an experienced pro (or team of pros) at the helm, giving us a muchbetter chance of avoiding dividend disasters. (If you’re unfamiliar with CEFs, click here for a complete primer on these high-yield investments.)

Better yet, we can get a much bigger income stream, like the fund I mentioned off the top that pays 9.5% now (it’s pick No. 3 below).

So without further ado, here are the 3 funds that should be on your list if you’re looking to add some utility exposure to your portfolio.

Fund #1: Big Total Returns and a Nice Discount

The first fund to consider is the Reaves Utility Income Fund (UTG).

This fund holds a ton of utilities and is well run, with a 9.6% annualized total return over the last decade, the best of all utility-focused CEFs. Plus, UTG pays a 6.1% dividend yield—a solid cash stream that’s nearly double what XLU gives us.

The best part? UTG has crushed the index:

Beating the Dumb Money

This strong outperformance shows UTG’s managers are more than earning their 1.7% fees (the returns of this fund, and all funds I show you, are after fees are paid out). That makes it a good fund to consider for utilities exposure.

Fund #2: Strong Returns on Sale

I wrote about the Cohen & Steers Infrastructure Fund (UTF) back on November 24, and since then shareholders have gotten a couple of treats. The first is the special dividend that shareholders are going to get at the end of the year, which boosts the fund’s forward yield to a juicy 8.8%! Despite those generous payouts, UTF has grown its net asset value (NAV, or what its underlying portfolio is worth) by 24.1% in 2017 on a total-return basis, far more than XLU’s 17% NAV gains for the same period.

UTF is also undervalued, with a market price that’s 9.3% lower than its NAV—but the fund traded at half that discount just a few months ago:

A Buy Window for UTF

A 20% capital gain isn’t out of the question for this fund in 2018, on top of its healthy income stream. That definitely makes UTF a utility CEF to consider now.

Fund #3: Bet on World Growth and Get 9.5% Income

Finally, let’s take a look at that fund I mentioned off the top—the one that pays out a 9.5% dividend yield. It also trades at a nice 4.8% discount to its NAV.

Why so cheap?

One reason, and one reason only: the market is stuck in the past. This fund, the Macquarie/First Global Infrastructure Fund (MFD), has had lackluster returns in the last few years due to the US dollar. The income from its investments is sound, but the US dollar had been getting stronger, which meant the foreign currency–based income MFD earns has been worth less and less in US-dollar terms.

Now take a look at this:

Weaker Dollar, Stronger Gains

The recent weakness in the US dollar has helped MFD’s income strengthen throughout 2017, and that’s resulted in more money flowing into the fund. But the weakness in the greenback isn’t over, which means MFD’s income stream is going to get stronger.

How do I know the US dollar isn’t poised for a turnaround?

Simple: the government said so.

Not only has President Trump said he supports a weaker US dollar, but the Federal Reserve has repeatedly said it wants to encourage more risk-taking investment in the American economy.

That means the Fed wants companies to take the dollars they’re sitting on and put them to use through building, investing and hiring. This lowers demand for the greenback, as we’ve seen throughout 2017. Expect this trend to continue—and expect MFD to benefit.

4 More “Sleeper Hits” With Dividends Up to 10.4%

Just a couple weeks ago, I released a fully updated FREE Special Report on my 4 favorite funds for 2018—and I made one last-minute addition I think you’ll love.

It’s a totally ignored CEF that boasts an incredible (and easily sustainable) 10.4% dividend payout! So a $100,000 investment would hand us a safe $10,400 a year in dividend payouts—or $2,600 every quarter!

Just imagine what that could do for your retirement.

There’s more: this unsung CEF is ridiculously undervalued—I’m talking about a 5.3% discount to NAV here. That doesn’t sound like much until you realize that this fund usually trades at a 1.7% premium.

That simply means we’ve got a nice gain already baked in when that “normal” premium returns—as it’s already starting to do!

That’s to say nothing about the “bonus” upside this 10.4%-paying income titan has, thanks to its other secret weapon: its top-notch management team.

In short, this crew has an eye for bargains unlike any I’ve ever seen: this CEF’s portfolio is made up of a basket of stocks with an average P/E ratio of 17.5—way lower than the S&P 500’s nosebleed 25!

Add it all up, and this unsung fund is lined up for EASY 20% price gains “on the side” in 2018.And I’ll say it again: we’ll still be collecting that 10.4% income stream along the way!

Editor's Note: The stock market is way up – and that’s terrible news for us dividend investors. Yields haven’t been this low in decades! But there are still plenty of great opportunities to secure meaningful income if you know where to look. Brett Owens' latest report reveals how you can easily (and safely) rake in 8%+ dividends and never worry about drawing down your capital again. Click here for full details!

Source: Contrarian Outlook

For the last three months, the value of Uniti Group Inc. (Nasdaq: UNIT) has been a real turkey for high yield stock investors. Since late July share owners have experienced a decline of the UNIT share price from the mid $20’s to a recent low under $14. With the recent earnings report out of Uniti, the stock now looks like a Thanksgiving dinner, offer a great yield and significant share price upside.

The suspension of dividend payments by Windstream Holdings, Inc. (Nasdaq: WIN) was the trigger event for the decline of the UNIT share price.

Uniti was spun-off by Windstream with an April 2015 IPO. Uniti is structure as a real estate investment trust (REIT), and in the spin-off received most of Windstream’s fiber and copper wirelines network. Windstream signed a 15-year (with options for extension out to 35 years) master lease with Uniti.

When Windstream announced that it would no longer pay common stock dividends, the immediate fear was that Windstream was in immediate danger of bankruptcy and that Uniti would stop receiving lease payments from its largest by far customer. The fate of Windstream and dangers to Uniti have both been overblown by online financial pundits and fear driven investors. Here are the pertinent fundamentals for each company.

Windstream made the decision to stop paying dividends for a couple of reasons. First, the market kept the stock’s yield in the high teens, not putting much value on the dividend amount. More importantly, the Windstream board decided that the cash being used to pay dividends would be better utilized to pay down the company’s debt load. Soon after the announcement of the dividend suspension, Windstream was sued by a vulture fund, claiming the company had broken its debt covenants with the Uniti spin-off. This claim was two years late and widely analyzed as blackmail to get a payoff out of Windstream. The company has fought back hard and has made strategic moves that will significantly improve the overall debt situation. Here is the financial situation for Windstream.

The company will generate $2.0 to $2.2 billion per year of operational income before depreciation, amortization and rent (OIBDAR). The rent is the $653.6 million annual lease payment to Uniti. The company spends about $800 million per year on capital expenditures. A little math shows the company has a $650 million cash cushion above the Uniti lease payments and capital spending required to keep the business functioning. While Windstream is a company that faces the financial challenge of developing new revenue to replace the declines in its traditional landline service, it is not a company on the brink of financial disaster. The company has put in place growth initiatives that will result in a reversal of recent revenue declines. The lease payments to Uniti can be viewed as a contract that must be paid if Windstream is to stay in business. The master lease cannot be changed in bankruptcy, should that highly unlikely event occur.

At the IPO, the Windstream lease accounted for 100% of Uniti’s revenue and earnings. Over the last 2 ½ years, the company has been making acquisitions that have driven the Windstream lease share of revenues down to 65%. The acquisitions have been fiber and small cell service providers. The number of Uniti customers has increased from one to over 16,000. Of greater importance, the purchased companies are growth businesses. During the third quarter, Uniti closed on the two acquisitions of Southern Light and Hunt Telecom. The company now has one of the largest pure-play fiber operating platforms in the country with the ability to deploy small cells, fiber-to-the-macro tower, dark fiber, enterprise services and E-Rate services. These lines of business are growing and will lead to growing free cash flow per share to protect the current dividend and provide for possible future dividend increases.

The current UNIT dividend is $0.60 per quarter, or $2.40 annually. The company will generate AFFO per share of $2.51 in 2017 and is forecast to produce AFFO of $2.67 per share in 2018. With the stability of its revenues, this is strong dividend coverage for Uniti. The company has already declared another $0.60 dividend to be paid in January.

See also: 5 REITs Raising Dividends in December

At $16 per share, UNIT yields a very high 15%. As the market sees continued stability of the cash to pay the dividend, the stock will climb to at least $24, which would give a 10% yield. If there is cash flow growth, the stock will again approach $30 in 2018.

UNIT and stocks like it would be a great addition to your dividend growth portfolio. You see, it’s not just important to include high-yield stocks that give you income now, but to hold stocks that can give you a high return from a blend of high yield and rapid share price appreciation.

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Quality high-yield stocks need to be a core component to your income portfolio. Not only do you get the high yields but you also enjoy share price gains as an added bonus. There are several best in class REITs just like UNIT in the portfolio of my Dividend Hunter service which features the Monthly Dividend Paycheck Calendar.

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On Monday, General Electric Company (NYSE: GE) answered the “will it, or won’t it” question and reduced its dividend by 50%. Even though the date of the announcement was known, and a cut was widely anticipated, the GE share price dropped by 8%. This drop comes after the 15% share price decline since 2017 third quarter earnings were released on October 20.

For dividend focused stock investors, the risk of a dividend cut is in most cases the biggest danger. A dividend reduction results in the double-whammy of a lower future income stream combined with what is often a sharp drop in the stock’s share price. At that point an investor will be forced to sell at a loss and reinvest into different stocks that likely pay a lower yield. It is common knowledge that a high stock yield indicates the market is pricing the stock for a dividend cut. The market may be mistaken, or it may be right. The challenge is to find those high yield stocks where the current dividend rate is secure and to avoid or dump the high yield stocks where a dividend reduction is likely or probable.

Here are three high yield stocks that could be dangerous to your portfolio value. Consider selling if you own and definitely do not buy to chase the current high yields.

Frontier Communications Corp (Nasdaq: FTR) currently yields over 30%! It is less than a year since the company reduced its dividend by 50%. Frontier Communications is one of the handful of regional telecom companies that have struggled to sustain revenues through the shift from landline telephone service to everyone using wireless phones.

These companies face the triple challenge of servicing large debt loads, capital spending requirements to bring their networks into the modern age where they can sell other services to offset falling landline revenues and supporting large dividend payments.

These companies have historically been viewed as income stocks, and management teams have tried without success to balance the three spending channels. Frontier Communications is a company that likely must follow Windstream Holdings, Inc. (Nasdaq: WIN) and completely suspend its dividend.

New Senior Investment Group (NYSE: SNR) is a healthcare sector REIT that currently yields 12.75%. This is one of the highest yields across the entire REIT sector. The company operates through two segments: Managed Properties and Triple Net Lease Properties. Under its managed properties segment, New Senior Investment invests in senior housing properties throughout the United States and engages property managers to manage those senior housing properties.

With its triple net lease segment, the company invests in senior housing and healthcare properties throughout the United States, and leases those properties to healthcare operating companies under triple net leases. New Senior Investment faces the challenge of a very high debt load and declining free cash flow. The senior housing segment also faces the potential of reduced reimbursements from government programs. The high SNR yield is not worth the risk.

NuStar Energy LP (NYSE: NS) is an energy midstream master limited partnership (MLP) that currently yields 14%. Since NuStar has been paying the same quarterly distribution for over six consecutive years, an investor might view the large payout as relatively secure.

This company’s problem stems from a $1.5 billion acquisition made earlier this year. (NS has a $2.9 billion market cap.) With the purchase, the company’s debt has ballooned to $3.7 billion and the new assets are not forecast to generate significant cash flow until sometime in late 2018.

Currently, due to the larger debt loan, NuStar’s distributable cash flow (DCF) covers just 70% of the distributions paid to limited partner unit holders. With the current DCF forecasts and distribution rate, NuStar will be borrowing up to $100 million per year for a couple of years to keep paying the distribution. Investors should steer clear of any company that must borrow a lot money for an extended period to keep paying the current dividend.

Sometimes high yields serve as a strong warning to investors that a company is in trouble. But not always. Sometimes a company can be run well enough that it can afford to be generous to income investors. Sometimes a company is required by law to pay out huge dividends to investors.