{"id":34601,"date":"2023-07-12T09:31:16","date_gmt":"2023-07-12T13:31:16","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/the-safe-way-to-profit-from-artificial-intelligence-yields-6-2\/"},"modified":"2023-07-12T09:31:18","modified_gmt":"2023-07-12T13:31:18","slug":"the-safe-way-to-profit-from-artificial-intelligence-yields-6-2","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=34601","title":{"rendered":"The Safe Way To Profit From Artificial Intelligence (Yields 6.2%)"},"content":{"rendered":"<div>\n<p>Few people would put the words \u201cartificial intelligence\u201d and \u201cbig dividends\u201d in the same sentence\u2014but those folks have never heard of closed-end funds (CEFs)!<\/p>\n<p>These \u201cyield machines\u201d are perfect plays on the surging AI megatrend for three reasons:<\/p>\n<ul>\n<li><strong>Big dividends:<\/strong> Thanks to CEFs, we can \u201cdownload\u201d big cash payouts from stocks that pay low (or no!) dividends themselves. Getting our payouts in cash, rather than paper gains, is <em>priceless<\/em> in the sometimes-volatile world of AI investing.<\/li>\n<li><strong>Lower volatility:<\/strong> Speaking of volatility, as most equity CEFs invest in various sectors\u2014not just tech\u2014we get some extra insurance over folks who try to \u201ccherry-pick\u201d the AI trend themselves. The CEF we\u2019ll talk about below, for example, carries a 5-year beta rating (a measure of volatility) of 1.2, only modestly more than the S&amp;P 500 and on par with the NASDAQ.<\/li>\n<li><strong>\u201cClock rewinding\u201d discounts: <\/strong>CEF veterans know about a CEF\u2019s discount to net asset value (NAV), which lets us buy the stocks in a fund\u2019s portfolio for less than they\u2019re really worth. This is a \u201csecret weapon\u201d with megatrends like AI, because it lets us buy for prices not seen in months.<\/li>\n<\/ul>\n<p>Let\u2019s dive into the ticker I have for you today\u2014it\u2019s a \u201cstealth\u201d AI play that\u2019s no flash in the pan: it was launched 20 years ago, when AI was the stuff of science fiction.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">A 20-Year-Old Fund That Taps AI for 6.2% Dividends\u2014for 16% Off<\/h2>\n<p>That would be the <strong>Gabelli Dividend &amp; Income Fund (GDV), <\/strong>which was launched in 2003 and yields 6.2% today (with a payout that rolls your way monthly). GDV also trades at a 16% discount to NAV that\u2019s actually gotten wider in the last few months.<\/p>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>In other words, we can pick up GDV for just 84 cents on the dollar!<\/p>\n<p>So why do I see GDV as an AI play? Let\u2019s walk through its holdings, above, and see. First, and most obviously, the fund holds the two blue chips that exemplify AI No. 3 holding <strong>Microsoft (MSFT) <\/strong>and No. 4 holding <strong>Alphabet (GOOGL).<\/strong><\/p>\n<p>But here\u2019s what most folks don\u2019t realize: GDV\u2019s other holdings are a who\u2019s who of companies that will profit from the productivity gains AI brings, like <strong>Mastercard (MA)<\/strong>, <strong>American Express (AXP)<\/strong>, <strong>JPMorgan Chase &amp; Co. (JPM) <\/strong>and industrial giant <strong>Honeywell (HON)<\/strong>.<\/p>\n<p>That\u2019s another nice thing about investing through CEFs: you can buy without having to change investments, because a CEF like GDV holds many of the same stocks you likely already own\u2014but with a 6.2% payout.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">How a Closing CEF \u201cDiscount Window\u201d Can Drive Fast Gains<\/h2>\n<p>Now let\u2019s talk a bit more about that discount to NAV, because at 16%, it\u2019s right around where we bought GDV in my <em>Contrarian Income Report<\/em> service back in October 2020.<\/p>\n<p>Over the next 15 months, we pocketed GDV\u2019s generous payout <em>and<\/em> enjoyed a 34% price increase as its discount narrowed from 16% to 10%, effectively catapulting the price higher. Add in the dividend (as shown in the orange line below), and our \u201cdiscount-driven\u201d total return came in at 44%\u2014or a gaudy 31.1% on an annualized basis.<\/p>\n<p>That narrow discount, plus the fact that Jay Powell was right at the start of his tightening spree near the end of our holding period, gave us a nice spot to step out, so we did, taking our 44% return with us.<\/p>\n<h2 class=\"subhead-embed color-accent bg-base font-accent font-size text-align\">A 6.2% Payout That Grows<\/h2>\n<p>Now the wind has swung back behind GDV, with rates topping out and the fund giving us a nice \u201cin\u201d on the AI trend, thanks to its 16% discount, safe blue-chip exposure to AI and its 6.2% monthly payout, which has grown 22% in the last decade. (Plus Gabelli drops the odd special dividend on his investors, too.)<\/p>\n<p><strong>A \u201cLike-Clockwork\u201d Monthly Dividend (With Bonus Payouts, Too)<\/strong><\/p>\n<p>All of the above points to a narrower discount for GDV than the 10% it hit last time we held it\u2014and potential for strong price upside as that happens.<\/p>\n<p><em>Brett Owens is chief investment strategist for <\/em><em data-ga-track=\"ExternalLink:https:\/\/contrarianoutlook.com\/free-monthly-dividend-report-offers\/forbessig?source=MNTHLYFSIGCOREG=&amp;utm_source=forbes&amp;utm_medium=cpc&amp;utm_campaign=signature\">Contrarian Outlook<\/em><em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n<p><em>Disclosure: none<\/em><\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/brettowens\/2023\/07\/12\/the-safe-way-to-profit-from-artificial-intelligence-yields-62\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Few people would put the words \u201cartificial intelligence\u201d and \u201cbig dividends\u201d in the same sentence\u2014but those folks have never heard of closed-end funds (CEFs)! These \u201cyield machines\u201d are perfect plays on the surging AI megatrend for three reasons: Big dividends: Thanks to CEFs, we can \u201cdownload\u201d big cash payouts from stocks that pay low (or [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":34602,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-34601","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Safe Way To Profit From Artificial Intelligence (Yields 6.2%) | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Few people would put the words \u201cartificial intelligence\u201d and \u201cbig dividends\u201d in the same sentence\u2014but those folks have never heard of 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