{"id":89401,"date":"2023-12-02T11:00:39","date_gmt":"2023-12-02T16:00:39","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/this-6-5-dividend-will-go-from-cheap-to-pricey\/"},"modified":"2023-12-02T11:00:42","modified_gmt":"2023-12-02T16:00:42","slug":"this-6-5-dividend-will-go-from-cheap-to-pricey","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=89401","title":{"rendered":"This 6.5% Dividend Will Go From Cheap To Pricey"},"content":{"rendered":"
\n

With the S&P 500 up double-digits this year, the media is at it again\u2014cranking up worries that we\u2019re headed for another crash.<\/p>\n

\u201cStock-Market Crash: Expert Shares Huge \u2018Red Flag\u2019 Signaling Recession,\u201d says Business Insider. \u201cWill the Stock Market Crash? This Hedge-Funder Thinks So,\u201d declares New York Magazine<\/em>.<\/p>\n

And on it goes.<\/p>\n

I suppose it makes sense, given that the S&P 500\u2019s roughly 19% gain so far this year is a lot more than its typical return. Thing is, 2023 does not exist in a vacuum divorced from history, and just a tiny bit of history shows we\u2019re not yet<\/em> in a bull market, and stocks are not overheated, despite their recent gains.<\/p>\n

And as we know at CEF Insider<\/em>, we can give ourselves an extra discount, and the greater peace of mind that comes with it, when we buy our stocks through closed-end funds (CEFs) trading at discounts to net asset value (NAV, or the value of their underlying portfolios).<\/p>\n

Without taking dividends into account, we\u2019re still about 5% from the peak, which we hit in the first couple days of 2022. And with dividends, we\u2019re 2.1% from the peak. In other words, we\u2019re recovering from 2022\u2019s bear market, but we are not<\/em> in a bull market yet.<\/p>\n

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

This difference is important because if stocks were to simply move sideways over the next year, they wouldn\u2019t get back to their peak point in about three years. That would mean a total of five years of flat stocks, an event that hasn\u2019t happened since the dot-com boom.<\/p>\n

Before that, this only happened three other times, all of which make sense: after the 1920s stock-market crash, as a result of the 1973 oil embargo, and during World War II.<\/p>\n

Unfortunately, there isn\u2019t much these precedents can tell us about today. I don\u2019t think we can prepare for World War III, for example. Stocks (and for that matter money!) probably won\u2019t matter much if that ever happens. And we obviously aren\u2019t in a depression.<\/p>\n

As for 1973, a return of similar conditions as we saw back then was a risk in early 2022 (that\u2019s why the market crashed even when the data was good\u2014anxiety about this scenario was just too high). And if we had high inflation and low growth like in the 1970s, stocks and the economy would struggle for a long time.<\/p>\n

But that\u2019s not how it played out, with inflation tumbling and now creeping ever closer to the Fed\u2019s target range.<\/p>\n

Inflation, after soaring in 2022, started to drop in the second half of that year. This is very different from the two years beginning with the oil embargo.<\/p>\n

The reason for the difference is, of course, the Fed: back then, the central bank\u2019s monetary policy was loose, and now, as we all know well, the Fed has steadily hiked interest rates and is dedicated to keeping them higher for longer.<\/p>\n

The upshot here is that if we don\u2019t have the major crises of the past that caused years of low returns, and if stocks aren\u2019t still fully recovered, we have a great setup for buying.<\/p>\n

GDV: Managed Risk With Managed Payouts<\/h2>\n

Despite this, many people are still wary of jumping into stocks, and after the wild ups and downs of the last few years, I can\u2019t blame them.<\/p>\n

This is where a CEF like the Gabelli Dividend & Income Trust (GDV)<\/strong> can help. The fund pays a monthly dividend that yields 6.5% on an annualized basis while giving us a diversified collection of proven large caps like Mastercard
\n
\n MA
\n <\/fbs-ticker> (MA), Microsoft (MSFT),<\/strong> food maker Mondelez International
\n
\n MDLZ
\n <\/fbs-ticker> (MDLZ)<\/strong> and JPMorgan Chase & Co. (JPM).<\/strong><\/p>\n

Those are all lower-volatility names on their own. Plus, if you\u2019re concerned about having too much stock exposure, you can draw off that 6.5% income stream and invest it somewhere else while you wait for this market to shift from recovery to further growth.<\/p>\n

And thanks to GDV\u2019s value-investing focus and selection of stocks with sustainable gains and reliable growth, the fund has produced stable dividends for a long time.<\/p>\n

GDV also is getting less <\/em>investor attention in 2023, not more, despite its portfolio seeing a bump as stocks gain steam. That\u2019s pushed its discount to net asset value, or the gap between the fund\u2019s portfolio value and its market price, into the high double digits. (Though it is showing some momentum lately, which is a trend we like to see in CEFs\u2014a discount that\u2019s still wide but starting to disappear.)<\/p>\n

The bottom line here is that as we see more investor interest in CEFs as stock-market gains continue, thanks to falling inflation and the need to catch up from 2022\u2019s decline, this $2.5-billion fund\u2019s discount will likely go back to the 2.4% discount it had in 2018. As that happens, it will unlock capital gains, on top of GDV\u2019s income stream.<\/p>\n

It\u2019s just a matter of waiting for more investors to jump in to CEFs. But after a year on the sidelines, I expect that time is coming sooner rather than later.<\/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 10.9% 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":"

With the S&P 500 up double-digits this year, the media is at it again\u2014cranking up worries that we\u2019re headed for another crash. \u201cStock-Market Crash: Expert Shares Huge \u2018Red Flag\u2019 Signaling Recession,\u201d says Business Insider. \u201cWill the Stock Market Crash? This Hedge-Funder Thinks So,\u201d declares New York Magazine. And on it goes. I suppose it makes […]<\/p>\n","protected":false},"author":1,"featured_media":89402,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-89401","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"\nThis 6.5% Dividend Will Go From Cheap To Pricey | iFintechWorld<\/title>\n<meta name=\"description\" content=\"With the S&P 500 up double-digits this year, the media is at it again\u2014cranking up worries that we\u2019re headed for another crash. \u201cStock-Market Crash:\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ifintechworld.com\/?p=89401\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" 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