5 Monthly Closed-End Funds Yielding Up to 15.6%
January 31, 2020
These Closed-End Funds Pay Monthly Investment Income
Recently, rock-bottom yields have been punishing savers. Nowadays, even a six-figure nest egg won’t bring enough investment income to fund a comfortable retirement.
And retirees face another problem: infrequent distributions. Most bonds and dividend stocks pay investors on a quarterly or semi-annual basis. That can make it difficult to juggle regular bills like food, power, and heating.
But one quiet financial niche could provide a solution: monthly closed-end dividend funds.
Closed-end funds work in much the same way as the plain-Jane exchange-traded funds (ETFs) you might be more familiar with.
These investment partnerships buy portfolios of securities that you can trade pieces of on the public stock market. So in one shot, you can own a diversified portfolio of assets without having to research individual stocks yourself.
Different funds follow different strategies. But thanks to the growing demand for yield, issuers have released a growing number of income funds in recent years. And to help savers better match their investment income with their monthly expenses, many of these securities pay on a monthly basis.
How can you beat that?
5 Top Monthly Closed-End Funds
To help get you started, I’ve highlighted a few of my favorite closed-end funds below. To be clear, the list here doesn’t represent a series of “buy” recommendations. It does, however, present a great starting point for further research.
| Company Name & Stock Ticker | Market Cap | Yield |
| Stone Harbor Emerging Markets Income Fund (NYSE:EDF) | $212.1 Million | 15.6% |
| Highland Global Allocation Fund (NYSE:HGLB) | $203.5 Million | 11.1% |
| Alpine Global Premier Properties Fund (NYSE:AWP) | $568.8 Million | 7.2% |
| New America High Income Fund Inc. (NYSE:HYB) | $212.9 Million | 7.2% |
| Tekla Healthcare Opportunities Fund (NYSE:THQ) | $772.5 Million | 7.1% |
(Source: Google Finance and Yahoo! Finance, last accessed January 30, 2020.)
Let’s say a few words about these closed-end funds.
Highland Global Allocation Fund (NYSE:HGLB) and Stone Harbor Emerging Markets Income Fund (NYSE:EDF) crank out some of the highest yields around. Many investors hate these funds because they keep a large chunk of their assets in Asia, Europe, and South America.
These global markets have fallen out of favor in recent years thanks to a strong U.S. dollar and political turmoil overseas. As a result, both HGLB and EFT trade at a discount to their liquidation value.
This situation, however, could create a great investment opportunity. First, prospective shareholders can buy collections of great assets for $0.90 on the dollar. Second, if Wall Street fashions change (which they always seem to), global equities could one day find an unexpected boost in price. In the meantime, investors will get well paid in dividends while they wait.
You have a simple story with Alpine Global Premier Properties Fund (NYSE:AWP). Over the past decade, management has accumulated stakes in some of the world’s most valuable real estate properties: hotels, office buildings, cell phone towers, etc.
These partnerships throw off steady, growing streams of investment income, which Alpine passes on to investors. Predictable and profitable. If the global economy nosedives due to something like the coronavirus scare, this closed-end fund will likely keep cranking out distributions.
The New America High Income Fund Inc. (NYSE:HYB) might seem like an odd pick, but don’t dismiss this fund too quickly. Management has assembled a portfolio of high-yield junk bonds from less-than-stellar issuers.
Yes, these investments tend to sink during a downturn. But investors get well compensated for the risks they’re taking: a seven-percent-plus yield at the time of this writing. As long as investors understand the potential downsides, HYB can make an attractive investment income supplement to a well-balanced portfolio.
The bull thesis for healthcare hasn’t changed in years. Each day, 10,000 baby boomers turn 65 in the United States. That older population means more demand for everything from drugs and doctor visits to hospitals and retirement communities.
Tekla Healthcare Opportunities Fund (NYSE:THQ) has assembled a portfolio of top companies banking on this trend: Merck & Co., Inc. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and more. And that has created a large, growing income stream for investors. (Source: “Portfolio,” Tekla Capital, Management LLC, last accessed January 28, 2020.)
