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Sneak Preview of My January 2006 Issue of High-Yield
Investing |
Published: December 20, 2005
In My Upcoming January 2006
Issue of High-Yield
Investing I'll Introduce You to My Newest "Income Security
of the Month" -- A Closed-End Fund that is Now Yielding 17.2%
A battle is raging under the
noses of income investors. Last month, the Wall Street Journal
warned investors to resist the enticing dividend yields offered by
closed-end funds with the headline: "Closed-End Funds Offer High
Yields, But Investors Shouldn't Take the Bait."
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Within days, closed-end fund
manager Calamos Investments defended its turf with a report entitled --
"Investors Beware: All Closed-End Funds Are Not Alike."
Who's right? Although there's
quite a bit of truth to both sides of the argument here, the bottom line
is I believe investors have overreacted in their concerns about this
unique asset class. As a result, this has provided us with some terrific
entry points in a handful of select closed-end funds.
Many closed-end funds borrow
money to fund their investments. Higher interest rates raise borrowing
costs, squeezing profits and reducing shareholder payouts. But not all
funds react in the same way to rising interest rates, and besides, the
rate tightening cycle may be nearing an end anyway.
That's good news for investors
in closed-end funds. According to equity research firm Standard &
Poor's, although rate-sensitive stocks usually suffer when interest
rates are on the rise, they also tend to rally sharply during the
12-month period following the end of a Federal Reserve rate hike cycle.
I don't want to get too ahead of myself here, but that's just one more
reason why I've decided now is an opportune time to consider a few
select closed-end funds. I'll do exactly that in my upcoming January
2006 issue of my premium income investing newsletter -- High-Yield
Investing.
In my next issue I'll also
bring you the complete details on my newest "Income Security of the
Month" -- a closed-end fund that's now paying a dazzling dividend
yield of 17.2%!
And no, the yield hasn't moved
up because the share price has fallen. In fact, the shares have gained
around +20% in the past year, giving investors total returns of about
+40% (including dividends). If that's not good enough, consider that if
you had held this fund in your portfolio since its inception back in
September 1989, you would have earned an incredible +942% return on your
initial investment!
Another thing I like about this
fund is that it invests exclusively in one of the world's fastest
growing economies. This country's economy is expected to deliver annual
growth of about +6% both this year and next. That's well ahead of the
U.S. economy's paltry +3% growth rate.
And finally, thanks to the fact
that it owns a large basket of different stocks, this fund offers the
security that comes with a well-diversified financial instrument.
