{"id":46808,"date":"2023-08-10T11:22:07","date_gmt":"2023-08-10T15:22:07","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/this-9-5-dividend-is-cheap-will-rise-in-recession\/"},"modified":"2023-08-10T11:22:20","modified_gmt":"2023-08-10T15:22:20","slug":"this-9-5-dividend-is-cheap-will-rise-in-recession","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=46808","title":{"rendered":"This 9.5% Dividend Is Cheap, Will Rise In Recession"},"content":{"rendered":"
\n

Everyone hates bonds right now. Perfect\u2014let\u2019s buy this nifty 9.5% payer while it\u2019s discounted!<\/p>\n

Why the sale? A bearish narrative, of course. In 2023, we have a narrative for everything<\/em>, after all.<\/p>\n

Last week, the Bank of Japan (BOJ) announced it is softening \u201cyield control\u201d efforts for 10-year Japanese government bonds (JGBs). Inflation is finally picking up in Japan, and the BOJ is still<\/em> printing money to buy JGBs.<\/p>\n

Ironic? Yes<\/em>. But the BOJ, the money-printing addict, is finally<\/em> admitting it has a problem. We can think of this as step two<\/em> of a potential multi-step inflation recovery effort. (Similar \u201cstarter\u201d measures began in September.)<\/p>\n

The 10-year JGB soared on the announcement to nine-year highs. US 10-year Treasury bonds likewise popped back above 4% on the news.<\/p>\n

Then came the doozy from Fitch Ratings, which downgraded US government debt from its pristine AAA rating. (America was \u201cFitch slapped,\u201d reported the Internet. Ha!)<\/p>\n

<\/fbs-ad><\/p>\n

The reaction to the news is always most interesting to us contrarians. It wasn\u2019t pretty because stocks had recently been bid to the moon. They had nowhere to go but down, and down they went.<\/em><\/p>\n

The US bond market was routed too, hence those 10-year yields above 4%. Bond prices drop when yields rise. So there\u2019s an interesting thing about bond selloffs. They create better yields<\/em>.<\/p>\n

Not so for the S&P 500, which still only pays 1.4%. Put a million dollars into SPY, and we collect a pitiful $14,000 in yearly income. That\u2019s below the poverty level. No bueno!<\/p>\n

Long-dated US Treasuries at 4% are interesting. Eventually, these high rates are going to break the economy. We\u2019ll head into a recession, and yields will come down. As they always do.<\/p>\n

And bond investors who locked in 4% today will be bragging.<\/p>\n

But we contrarians will crow louder<\/em>. We\u2019re locking in a 9.5% payer\u2014at a discount to boot!<\/p>\n

Vanilla stock and bond investors, meet DoubleLine Yield Opportunities (DLY)<\/strong>, a fixed-income fund dishing 9.5%. DLY is discounted, <\/em>trading at 5% off its net asset value (NAV). Buyers today bank DLY\u2019s bonds for 95 cents on the dollar. This almost never happens with DLY!<\/p>\n

Contrast DLY with the popular iShares 20+ Year Treasury Bond ETF (TLT)<\/strong>, which pays 4.2% and trades at par. No deal here.<\/p>\n

This is the big advantage we have with closed-end funds (CEFs) like DLY. They often trade at discounts to their NAVs thanks to their fixed pools of shares. Where ETFs can\u2019t trade above or below their NAVs, CEFs can respond to the emotions of the market. Good for us!<\/p>\n

Be careful, though. Markdowns can be as common as premiums! Even with the current gloom in Bondland, PIMCO Corporate & Income Opportunity (PTY)<\/strong> trades at a 35% premium<\/em> as I write. That\u2019s right, investors are paying $1.35 for $1 in bonds. A very bad decision. PTY is not exactly a go-go tech stock you might pay up for expecting future riches.<\/p>\n

Oh, we pity the fools buying PTY at such lofty levels!<\/p>\n

PIMCO is a great bond shop, sure. Top of the heap. But there\u2019s no reason to pay a 35% premium, no matter the management.<\/p>\n

Especially when you can grab DLY in the sale section. DoubleLine is a heavyweight equal to PIMCO in the bond arena\u2014it\u2019s run by the Bond God Jeffrey Gundlach, whose decades of massive success have brought income to the savvy. The market is giving away five cents on Jeff\u2019s DoubleLine dollar here, plus<\/em> a 9.5% yield. Can contrarians be so happy?<\/p>\n

Yes! Let\u2019s take the deal\u2014while we can.<\/p>\n

Brett Owens is chief investment strategist for <\/em>Contrarian Outlook<\/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

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Everyone hates bonds right now. Perfect\u2014let\u2019s buy this nifty 9.5% payer while it\u2019s discounted! Why the sale? A bearish narrative, of course. In 2023, we have a narrative for everything, after all. Last week, the Bank of Japan (BOJ) announced it is softening \u201cyield control\u201d efforts for 10-year Japanese government bonds (JGBs). Inflation is finally […]<\/p>\n","protected":false},"author":1,"featured_media":46809,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-46808","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"\nThis 9.5% Dividend Is Cheap, Will Rise In Recession | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Everyone hates bonds right now. Perfect\u2014let\u2019s buy this nifty 9.5% payer while it\u2019s discounted! Why the sale? 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