More CEF Insider subscribers have been asking me how to deal with volatility lately. It’s easy to see why:

Another Downturn Appears … Then Disappears

So today I’m going to give you an easy way to cushion your portfolio in this whipsawing market. I’m actually going to show you three ways.

All three are closed-end funds (CEFs) with a special “insurance policy” that tones down market lurches. But you’ll still enjoy market recoveries, like the one we’ve seen in recent days.

The best part: we’ll keep our income stream strong and growing, thanks to these three funds’ massive 6.7%+ dividend yields. That kind of income stream isn’t only nice to have, it’ll be critical when we run into the next crisis, as I’ll explain further on.

The Covered-Call Edge

Let’s start with the traditional ways most people try to cut down volatility. Those would be holding cash—which, of course, gets you zero return—or so-called “safe” assets like Treasury notes, which pay a measly 2.5% at best.

If we want to have any kind of livable income stream in retirement, we need to do better. Which brings me to the solution I talked about off the top. It’s called a covered-call fund.

Let me explain.

“Covered call” refers to a strategy where a fund holds a basket of stocks, then sells “call options” (or the right to buy a security if it hits a certain price) to an outside buyer against one of its stock holdings. That generates income, as the buyer pays the seller (in this case our closed-end fund) a “premium” for the call option. This extra cash flow, in turn, acts as a kind of hedge if the fund’s stocks fall in value.

That’s how covered-call funds take the edge off a volatile market. Now let’s talk income—and dive into the three specific covered-call funds I have for you today.

3 “Laid Back” 6.7%+ Dividends You Can Buy Now

Since these funds receive cash for their call options, you can expect a bigger dividend stream from them. And that’s exactly what you get.

Massive Income Up for Grabs

The chart above shows three passive index ETFs you’re probably familiar with: the SPDR Dow Jones Industrial Average ETF (DIA), the SPDR S&P 500 ETF (SPY) and the Invesco QQQ Fund (QQQ). This trio attempt to match the performance of the Dow Jones Industrial Average, the S&P 500 and the Nasdaq 100 indexes, respectively.

As income plays, these three passive ETFs are all duds.

While DIA’s 3% yield is relatively strong, as you can see above, it’s the best of a pretty meager bunch when you compare them to their covered-call CEF alternatives: the Nuveen Dow 30 Dynamic Overwrite Fund (DIAX), the Nuveen S&P Dynamic Overwrite Fund (SPXX) and the Nuveen NASDAQ 100 Dynamic Overwrite Fund (QQQX).

Heck, QQQX actually yields 10 times more than its ETF cousin!

These three CEFs track the three indexes very closely, but with one big exception: they also sell covered calls against their holdings, which is why their yields are many times greater than those of their index counterparts.

Also, since they sell call options on their portfolios, the value of their portfolios doesn’t fall as sharply during times of volatility. That’s why DIAX’s net asset value (NAV) bottomed above that of DIA in the last month:

A Step Ahead of the Index Once …

And DIAX wasn’t the only one, since QQQX’s NAV, while still down, as tech hasn’t recovered as much as other sectors, still didn’t hit the lowest point QQQ’s NAV did:

… Twice …

And for the broader index fund, the covered-call approach also helped SPXX’s NAV escape the lowest point SPY did:

… And Three Times!

So, as you can see, holding these covered-call funds helps limit your fund’s downside during brief periods of volatility while also providing you with the market’s upside when stocks recover.

But the most important part is the income.

Your “Dividend Hedge” Against the Next Crash

For any retiree, or anyone who uses their portfolio as a source of income, these funds are a no-brainer, and a way to safeguard against accelerated losses during a downturn.

Think of it this way: if you held SPY over SPXX and you needed a 6.7% income stream, you would need to sell part of your portfolio during the downturn to guarantee that income stream keeps coming in. But SPXX avoids this forced-loss selling: thanks to its higher yield, you’re getting a huge slice of your return in cash, cutting the need to sell anything when you don’t want to.

During times of protracted volatility, like we saw in late 2018, being able to avoid selling is the difference between double-digit losses and long-term gains driven by patience and perseverance. And that’s exactly what these CEFs make possible.

This “Hidden” 7% Dividend Is Recession-Proof—and Tax-Free, Too

Covered-call funds aren’t the only CEFs that can build some Zen into your portfolio during a market wipeout.

There’s another type of high-yield CEF that can do the exact same thing: municipal-bond funds.

Muni-bonds are among the steadiest CEFs you’ll find because they’re backstopped by the most reliable consumer there is: the government!

States, counties, towns and cities issue municipal bonds (or “munis”) to fund badly needed infrastructure, such as roads, bridges, airports and railroads.

That makes them a solid source of income on their own—and you can boost your dividend stream even more if you buy your munis through a CEF, like the one I recommended just a few days ago, in the latest issue of CEF Insider.

Check out the steady upward climb my brand-new pick has put on over the past year (in blue below), compared to the motion sickness your typical S&P 500 investor suffered:

Imagine Holding This “Steady Eddie” Fund

And it still has plenty of room to run!

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

With my focus on higher yield investments, I often receive questions about various closed-end funds. CEFs are actively managed investment pools with shares that trade on the stock exchanges.

A lot of these funds carry very attractive yields. The danger is that this is an asset class where it is hard to separate the good from the bad from the truly ugly. Here are some danger signs and CEFs that illustrate those dangers.

There are over 500 CEFs trading on the U.S. stock exchanges. A large portion of the funds own municipal bonds and pay dividends that are the pass-through vehicles for the tax-free interest paid by munis.

These funds require different investment criteria and are a topic for another day. Today the focus is on CEFs in the taxable side of the investment universe. The group includes stock funds, bond funds, and hybrid funds.

Evaluating individual closed-end funds can be frustrating. Many fund managers are not very forthcoming about what the own in the portfolios and how they implement investment strategies. Here are some clues with examples that show potential closed-end fund problems.

Share price to NAV premiums. A defining feature of closed-end funds is that once a fund is launched, the management company will not buy back shares. Shares only trade on the stock exchange. That means a CEF will have two share prices, the market price and the net asset value (NAV).

Both deep discounts and high premiums to NAV are danger signals. If you pay a premium for NAV shares, you are paying more than the portfolio assets are worth. Premiums can collapse leading to losses in your fund investments.

The PIMCO High Income Fund (PHK) currently trades at a 29.0% premium to NAV. This means you pay almost $1,300 for $1,000 worth of bond assets. The chart shows how the share price collapsed in in the Spring even has the NAV was stable to rising.

From the price to NAV premium alone, this is a CEF to sell, not buy. If it was on an investor’s buy list, the best course is to wait until the spread again reaches a low teens percentage, comparable to where it was at the end of 2017.

This closed-end fund is not worth the 10.6% yield.

CEF dividends are not always dividends. Closed-end funds can establish what are called managed distribution schemes. This lets a fund pay level dividends, even if the portfolio income is uneven. What are paid as dividends may be portfolio income, realized capital gains or even return of investor capital –ROC. While some ROC is not destructive to the portfolio value, it is a danger signal and may indicate the fund manager is selling assets to keep paying the dividend. That will erode the NAV over time.

Cornerstone Strategic Value Fund (CLM) is a global equities fund with a 20% yield. CLM is paying a $0.2035 per share monthly dividend. Unfortunately, well over half of the dividend history for the last two years has been ROC.

So far in 2019, 79.7% of the dividends paid have been classified as ROC. That’s 80% of each dividend coming back as a return of the investors’ own money. The paying out of principal instead of earnings will lead to dividend cuts.

To start 2019 this fund slashed the monthly payout by 13%. This fund is an example of a CEF with an eye-popping yield that in reality provides a false sense of investment gains.

CLM is a fund to sell, not own.

Rising interest rates will be bad for bond funds. In the world of taxable CEFs, there are similar numbers of stock funds and bond funds. For bond funds, an increase in interest rates will lead to falling bond prices. The longer the maturity of bonds owned, the steeper the price decline.

Preferred shares are bond-like investments that typically do not have maturity dates. In a rising rate environment, preferred stocks share will decline even more than bond prices.

Nuveen Preferred Income Opportunities Fund (JPC) is a closed-end fund that owns a portfolio of debt securities and preferred stock.

79% of the portfolio has time to maturities more than 20 years. This is not the portfolio to own if long term rates start to increase. In additional to the long maturities, the PRF portfolio is 34% leveraged.

In a rising rate environment, the cost of leverage will go up, and that leverage will multiply the bond value drop.

This is a fund to sell if you think interest rates will go up in the next few years and is not worth the 7.5% yield.

I know I don’t have to tell you it’s tough (and very frustrating) trying to get any kind of income stream from your savings these days.

The average S&P 500 stock yields just 1.9%. That’s not even enough to cover inflation!

Treasuries? The 10-year note yields an almost equally pathetic 2.3%.

But there are still safe 7%+ dividends to be had—even in the “income desert” we’re living in now. I’ll show you three funds yielding up to 8.5% (more than 4 times the typical S&P 500 yield) in a second.

Dividends like those can let you clock out on a nest egg that’s far smaller than advisers say you need. I’m talking $550K—and maybe less. Here are two simple strategies for pulling it off:

• Go contrarian: Buy safe, 7%+-paying funds when they’re out of favor (I’ll give you a simple way to determine this shortly) and hold them through any market.
• “No Withdrawal”: We’ll build a portfolio that can let you retire on dividends alone. Because when you’re pulling in, say, a 7.5% average yield, you can generate a $40,000 income stream on just a $550K nest egg.
   
  For many folks, that’s enough to punch out, collect their dividend checks and ignore the market’s daily swings altogether!

Better yet, I’ve done the work for you.

Here are three overlooked funds yielding up to 8.5%. All three are what I call “pullback proof”: they hold the line during corrections like the “May massacre” we just saw.

High-Yield Pick No. 1: A “Preferred” 7% Dividend Paid Monthly

My first fund holds preferred shares, which are a perfect substitute for the “common” shares you probably own today.

A company’s preferred stock usually pays a much higher dividend than the “common” shares most folks buy. So by simply “trading in” your common shares for preferreds, you can double (or more) your income stream while still investing in the same company.

The tradeoff is usually less upside, but if you buy your preferreds through a well-run closed-end fund (CEF) —which I recommend—the cash return from your dividends can be so high you might not even notice.

Consider the Flaherty & Crumrine Total Return Fund (FLC) (payer of a monthly 7% dividend): it’s delivered a 214% total return (including dividends) since inception in 2003, driven by its huge cash payouts:

A Huge Gain—Mostly in Cash

And talk about pullback proof! Look at how it performed over the past month:

The Ultimate “Pullback-Proof” Play

And check out the total return FLC has posted since September 20, 2018, when last year’s collapse started.

FLC Shows Its Mettle

As you can see, the fund’s return didn’t drop nearly as far as the S&P 500 in the meltdown, and shareholders are actually up 10% since that correction started.

Finally, let’s talk upside.

With CEFs, the key number to watch is the gap between the fund’s market price and the value of the assets in its portfolio, known as the net asset value, or NAV.

As I write this, FLC’s discount stands at 4%, and it’s traded at narrower discounts (and even hefty premiums) over the last five years, so we can look forward to price gains as that discount creeps ever closer to par—and beyond.

High-Yield Play No. 2: A Top REIT Fund Yielding 7.1%

If your portfolio is low on preferreds and real estate investment trusts, you can grab both in one buy with the Cohen & Steers REIT & Preferred Income Fund (RNP).

RNP has crushed both the S&P 500 and the REIT benchmark Vanguard REIT ETF (VNQ) since inception in 2004—no mean feat for an income play like this.

A High-Yield Market Beater

And thanks to its huge dividend (current yield: 7.1%), a huge slice of that gain was in cash.

This fund taps its REIT holdings (51% of the portfolio) and preferred stocks (49%) to give us that steady 7.1% dividend (also paid monthly). And as with FLC, RNP has held up nicely this past month:

RNP Sails Through the “May Massacre” …

Also like FLC, it fell far less than the market during last fall’s correction, and bounced back faster, handing investors a nice 10% return.

… And the Fall Collapse, Too

Finally, you can grab this one at an 8.5% discount to NAV, a discount that can’t last, considering RNP’s “no-drama” approach and long history of crushing the S&P 500.

High-Yield Play No. 3: An 8.5% Dividend With Upside

The Western Asset High Income Fund II (HIX) is a high-yield bond fund with a long history of strong performance, having tripled in value (including dividends) since its IPO in the late 1990s, crushing the S&P 500.

This Fund Can’t Stop Climbing

HIX gives investors that strong return while yielding 8.5%. Management firm Legg Mason, which has been in the fixed-income business for 48 years, generates HIX’s 8.5% dividend through a portfolio that includes emerging-market bonds, high-yield corporate bonds, investment-grade corporates, bank loans and a small cash holding.

That high total return and consistent share-price performance make HIX worth your attention at any time, but now that it’s trading at a 9% discount to NAV, it’s particularly compelling.

That’s because the fund has traded near (or even above) par with its NAV for months on end in the past. So if you buy HIX now and wait for its discount to evaporate, you’d be looking at 9.9% gains on top of your 8.5% dividend stream.

5 More “Pullback-Proof” Plays Yielding Up to 9.6%

These three funds are just the start. And to tell you the truth, they’re not even my favorite “pullback-proof” buys now.

Those would be the 5 stocks in my just-released “Pullback-Proof” retirement portfolio, including one stock—a conservative lender with stellar loan performance—paying a “hidden” 9.6% dividend.

I say this stock’s dividend is hidden because its current yield—the one you’d see on Google Finance and Yahoo Finance—clocks in at 8.1%. That’s already massive, but the current yields on most screeners don’t account for one critical thing:

Special dividends.

And this REIT has a long history of special payouts. Check it out:

An 8.1% Dividend—and More

Add in this company’s last special payout, and its “real” yield pops to that incredible 9.6% I just mentioned.

Here’s what that payout means in dollars and cents: if you had $100K in this cash machine, you’d get $9,600 back in dividend cash in the past year alone—and I expect a similar total payout this year (this REIT usually rolls out its special dividend in the fall).

And when I say this stout dividend is “pullback-proof,” I mean it: check out how this stock performed in 2018—a year most investors would rather forget:

My Pick Soars in a Rough Year

That’s right: when the rest of the market tumbled, this pick’s owners actually bagged a near-14% return!

I’m ready to share the name of this pick and my 4 other top “Pullback-Proof” buys with you now.

These 5 reliable CEFs are similar to the 3 funds I showed you above, but with two critical differences: they’re set for stronger price upside (7% to 15% in the next year alone) and faster payout growth, too!

And you’re about to get the full story on each of them.

Stock Symbol	Ex-Div Date	Pay Date	Div Payout	Yield
GARS	06/06/19	06/21/19	0.23	13.35%
IGD	06/03/19	06/17/19	0.06	11.46%
IID	06/03/19	06/17/19	0.05	11.02%
FDEU	06/03/19	06/17/19	0.12	10.94%
AFIN	06/07/19	06/17/19	0.09	10.64%
FEI	06/03/19	06/17/19	0.1	10.25%
FPL	06/03/19	06/17/19	0.07	10.04%
CATO	06/07/19	06/24/19	0.33	9.73%
FDUS	06/06/19	06/21/19	0.39	9.65%
WHG	06/06/19	07/01/19	0.72	9.37%

source: Investors Alley

Pay Your Bills for LIFE with These Dividend Stocks

Get your hands on my most comprehensive, step-by-step dividend plan yet. In just a few minutes, you will have a 36-month road map that could generate $4,804 (or more!) per month for life. It's the perfect supplement to Social Security and works even if the stock market tanks. Over 6,500 retirement investors have already followed the recommendations I've laid out.

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For an investor trying to build wealth, the massive amount of news coming out of the financial media can be contradictory and confusing. Investors often don’t realize that there are two sides to every stock trade.

The seller doesn’t want to own the shares for a range of reasons, and the buyer does so with the belief that the share price will go up. One key to success is to understand which financial news is “real” and which is rumor or opinion, and thus “fake.”

Here are some tips that help you decide whether the stock market information you are hearing, or reading is actual, useful information, or is something we can drop into the “fake news” file.

• Real News: Information provided directly from the company behind the stock. The best of these are the quarterly and annual earnings reports. Income statements and balance sheets give accurate pictures of how a company is operating. Also useful are press releases on other topics and management comments during conference calls and Q and A sessions.

• Fake News: Short term market reactions and financial news comments about an earnings report. Wall Street analysts generate earnings forecasts that are just estimates, and the stock market treats it them as hit or miss targets. Also, in the fake news category are financial writer analysis articles. They can be useful to get an educated opinion, but they are not a substitute for doing your own analysis.

• Real News: Dividend payments. Dividends are a cash return on your investment that cannot be clawed back. Dividends are how a company shares profits with shareholders. If a company can grow profits, it will also grow the dividend payments. Looking at history and monitoring continued dividend payments are a great way to monitor a company’s financial success.

• Fake News: Counting on share price gains as sustainable and predictable profits. It can be surprising how quickly a stock that shows as a profit in your brokerage account can drop and wipe out your gains, and even go to a loss.

The challenge of expecting share appreciation to fuel your expected investment returns is that at some point you need to find another investor willing to buy your shares at a higher price. Trying to pick tops and bottoms in the stock market and share prices is a very difficult, if not impossible, way to build and sustain wealth.

• Real News: To build wealth or sustain a nest egg to last for decades, you need an investment strategy that will work through the stock market cycles. This means being ready to manage and invest during corrections and bear markets as well as when stocks are going up. In my newsletters I discuss strategies focused on building a dividend income stream. Whatever system and strategy selected, you should know how you are going to handle the periods when stock values are falling.

• Fake News: Hot tips and get rich quick offers are designed to separate investors from their money and not to help them actually succeed in reaching their investment goals. Think about this: If someone has a system that will turn a few thousand dollars into millions, why do they need to sell it?

The bottom line to this discussion is that successful investing for the long term will be based on fundamental analysis of the companies behind the shares. Dividend history and payments are a great way to track how well a company is doing, and an attractive yield is a great return in itself.

Here are three stocks currently out of favor with the market with great long term potential.

Tanger Factory Outlet Centers, Inc. (SKT) is a pure play owner of outlet style shopping centers. It is the only REIT focused on this type of retail space. Tanger has increased its dividend rate every year since the company’s 1996 IPO.

The recent “fake news” about the end of brick and mortar retail has driven the SKT share price down to around $18, compared to a high over $41 two years ago. The company is financially conservatively managed, and at some point, will resume a growth trajectory. Right now, value oriented investors can pick up shares with a 7.9% yield and annual dividend increases.

History shows that retail trends go through repeating cycles, and when retailers are again opening more stores than closing them, Tanger will be a great stock to own.

Aircastle Limited (AYR): is an aircraft leasing company that has almost 300 commercial planes leased to airlines around the world.

There are many factors that have “fake” news effects on the Aircastle share price. These include the global economic predictions, forecast travel plans, and the Boeing 737 Max problems. Good news is that Aircastle doesn’t own any 737’s.

Despite all the events that investors believe will affect the company’s results, Aircastle is a very profitable company with steady revenue and free cash flow growth. The dividend will be increased by 6% to 9% per year, generating attractive long term total returns, especially if you add shares on any dips.

Current yield is 6.0%.

CNX Midstream Partners LP (CNXM) is a is a master limited partnership that owns, operates, develops and acquires gathering and other midstream energy assets to service natural gas production in the Appalachian Basin in Pennsylvania and West Virginia.

This MLP is managed and sponsored by CNX Resources Corporation. The share values of both CNX and CNXM are down on lower natural gas prices. However, as a midstream services provider, CNXM operates as a fee based business whose revenues are not dependent on natural gas prices.

The MLP’s management team has stated they are targeting 15% annual distribution growth. Combine that growth with a current 9.7% yield and you have tremendous total return potential.

Pay Your Bills for LIFE with These Dividend Stocks

Get your hands on my most comprehensive, step-by-step dividend plan yet. In just a few minutes, you will have a 36-month road map that could generate $4,804 (or more!) per month for life. It's the perfect supplement to Social Security and works even if the stock market tanks. Over 6,500 retirement investors have already followed the recommendations I've laid out.

Click here for complete details to start your plan today.