{"id":58880,"date":"2023-09-09T07:46:45","date_gmt":"2023-09-09T11:46:45","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/this-mysterious-lag-lets-us-buy-my-favorite-7-5-dividends\/"},"modified":"2023-09-09T07:46:50","modified_gmt":"2023-09-09T11:46:50","slug":"this-mysterious-lag-lets-us-buy-my-favorite-7-5-dividends","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=58880","title":{"rendered":"This Mysterious \u2018Lag\u2019 Lets Us Buy My Favorite 7.5% Dividends"},"content":{"rendered":"
\n

If there\u2019s one thing that stands out about the market for our favorite high-yield investments in 2023, it\u2019s this: individual investors are still<\/em> too skittish to jump in.<\/p>\n

That\u2019s our chance, because this \u201clag\u201d means CEFs\u2019 prices haven\u2019t taken off, and these funds are throwing off dividend yields in the same neighborhood they were at the start of 2022\u2014around 7.5%, on average, today. And by being just a little<\/em> picky (as we will be with the fund talk about a bit further on), we can amp those payouts up to 10%+.<\/p>\n

Combine that with the discounts to net asset value (NAV, or the value of CEFs\u2019 portfolios) available across the space, and we\u2019ve got a shot at real upside, especially when you consider how far behind the S&P 500 that CEFs have lagged this year.<\/p>\n

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

When we look at the CEF Insider<\/em> Equity Sub-Index (a good proxy for stock-holding CEFs), we see that total returns for these funds are just 2% for 2023, a fraction of the S&P 500\u2019s 18% or so as of this writing. Clearly, individual CEF investors are still sitting on the sidelines, nearly a year into the stock-market recovery.<\/p>\n

Perhaps these folks are worried we\u2019ve recovered too much. That\u2019s understandable, but it\u2019s off the mark. A lot of headlines about 2023\u2019s strong year for stocks overlook the fact that the S&P 500 is still off all-time highs by about 6% or so.<\/p>\n

In any event, individual investors\u2019 skittishness is visible in the numbers, with mutual-fund inflows having just recently turned positive after several months of outflows last year and through the first half of 2023.<\/p>\n

It\u2019s surprising, and really kind of silly, that investors have taken money out <\/em>of stocks and stock funds in a year when the S&P 500 is up over 18%!<\/p>\n

It begs the question of how stocks are rising if individual investors aren\u2019t buying them. The answer is that hedge funds, investment banks and other large players have been getting there first because they know the fear of 2022 has caused a lag on investor money coming into the market.<\/p>\n

And with CEFs, that inflow has lagged even longer, giving us our in. But it\u2019s key to remember that this inflow is delayed,<\/em> not terminated, making now a smart time to buy and lock in not only CEFs\u2019 unusual discounts but their high yields, too.<\/p>\n

So, what data is driving those big rich companies to front run everyday investors? Lower inflation, for one, which has reduced pressure on the Fed to further hike interest rates. A topping out and rolling over of rates would, of course, be good for stocks and CEFs.<\/p>\n

At the same time, the US added more jobs than expected in August, and the unemployment rate rose because more people are returning to the labor force\u2014a positive sign for productivity, spending and, in turn, stocks and stock-focused CEFs.<\/p>\n

Lower inflation also frees up more money for consumers to choose what they spend on, which tends to encourage them to spend more. These days, for example, Americans are spending about as much on gas as they did before the pandemic, during the economically strong years of 2015 to 2019, and less than they spent in the early 2010s, before oil prices collapsed in 2014.<\/p>\n

A CEF like the Neuberger Berman Next Generation Connectivity Fund (NBXG) <\/strong>is a good way to play this lagged demand for equity CEFs. To start, it offers a 10.9% dividend that\u2019s found extra support from the fund\u2019s NAV performance, which has gained 20% this year, nearly double the fund\u2019s current yield.<\/p>\n

The fund, as the name suggests, is tech-focused, and fast-growing companies like Palo Alto Networks
\n
\n PANW
\n <\/fbs-ticker> (PANW), NVIDIA
\n
\n NVDA
\n <\/fbs-ticker>
\n
\n DIA
\n <\/fbs-ticker> (NVDA) <\/strong>and Lattice Semiconductor
\n
\n LSCC
\n <\/fbs-ticker> (LSCC)<\/strong> are top holdings\u2014and all are benefiting from the rapid growth of AI.<\/p>\n

That tech portfolio might have you concerned that NBXG is overvalued, but, thanks to foot-dragging individual investors, we\u2019ve got a chance to buy cheap\u201416.1% off cheap, to be exact: that\u2019s the discount to NAV at which the fund trades now.<\/p>\n

In other words, NBXG is one of the few places where you can buy NVIDIA shares for less than they trade for, and you get a 10.9% dividend, too. This is the kind of fund that investors can ignore for only so long\u2014and when they come back aboard, that premium is likely to narrow, taking NBXG\u2019s price with it.<\/p>\n

Michael Foster is the Lead Research Analyst for <\/em>Contrarian Outlook<\/em>. For more great income ideas, click here for our latest report \u201c<\/em>Indestructible Income: 5 Bargain Funds with Steady 10.4% Dividends.<\/em>\u201d<\/em><\/p>\n

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

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

If there\u2019s one thing that stands out about the market for our favorite high-yield investments in 2023, it\u2019s this: individual investors are still too skittish to jump in. That\u2019s our chance, because this \u201clag\u201d means CEFs\u2019 prices haven\u2019t taken off, and these funds are throwing off dividend yields in the same neighborhood they were at […]<\/p>\n","protected":false},"author":1,"featured_media":58881,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-58880","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"\nThis Mysterious \u2018Lag\u2019 Lets Us Buy My Favorite 7.5% Dividends | iFintechWorld<\/title>\n<meta name=\"description\" content=\"If there\u2019s one thing that stands out about the market for our favorite high-yield investments in 2023, it\u2019s this: individual investors are still too\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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