{"id":15614,"date":"2023-05-30T08:28:38","date_gmt":"2023-05-30T12:28:38","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/3-ways-to-play-d-c-drama-for-big-tax-free-dividends\/"},"modified":"2023-05-30T08:28:39","modified_gmt":"2023-05-30T12:28:39","slug":"3-ways-to-play-d-c-drama-for-big-tax-free-dividends","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=15614","title":{"rendered":"3 Ways To Play D.C. Drama For Big Tax-Free Dividends"},"content":{"rendered":"
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Few folks realize it, but there\u2019s a great<\/em> place to invest our money to profit from \u201cDC drama\u201d like the debt-ceiling fiasco. It\u2019s literally hiding in plain sight.<\/p>\n

I\u2019m talking, oddly enough, about government debt! But not federal-<\/em>government debt. Instead we\u2019re going to bypass DC and go with municipal bonds,<\/em> which are issued by sleepier (in a good way!) state and local governments to pay for infrastructure projects.<\/p>\n

Because here\u2019s what most folks don\u2019t realize: \u201cmunis\u201d do great when political shenanigans abound in DC. To see what I mean, think back to 2011, another period when a Republican House and a Democratic president scrapped over the debt ceiling.<\/p>\n

Munis? They soared 9% that year\u2014a big gain for this normally subdued asset class\u2014going by the performance of the benchmark iShares National Muni Bond ETF (MUB).<\/strong><\/p>\n

And that gain didn\u2019t<\/em> include their distributions. MUB, for its part, yields 2.2%, which is more than the typical S&P 500 stock, sure. But if we buy our munis through a closed-end fund (CEF) instead, we can get yields that triple that 2.2%: the three muni-bond CEFs we\u2019ll discuss in a bit yield 6.8% on average.<\/p>\n

Here\u2019s the best part about munis: their interest payments are tax-free<\/em> for most Americans, so their \u201creal\u201d payouts will be higher for you\u2014potentially much<\/em> higher, depending on your tax bracket.<\/p>\n

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Nuveen, sponsor of two of the CEFs we\u2019ll zero in on in a second, provides a calculator that calculates this for us. As you can see, a taxpayer in the highest bracket would pull a 9.4% taxable-equivalent yield from the 5.5%-paying Nuveen Municipal Credit Opportunities Fund (NMCO)!<\/strong><\/p>\n

With that in mind, let\u2019s talk about those three high-yielding muni-bond funds, which give us three ways to profit:<\/p>\n