Closed-end funds are a type of investment that always tends to fall under the radar yet they are high-dividend stocks that often pay monthly. Similar to mutual funds closed-end funds pool together different securities which allows you to buy them in a pooled investment.
One good trade strategy that many swing traders, day traders, and scalpers should heed is to put the majority of their funds into securities that provide earnings while they are trading and in between trades. Simply placing your funds in the money market where you are barely getting a return means that you are leaving a lot of money that sitting dormant from earning. All traders should have margin accounts. One of the values of margin loans is not just the borrowing of capital to make larger trades but to be able to hold a trade a little longer and not have to sell because you have found another good trade. Closed-end funds have a high level of margin to borrow against.
A closed-end fund is a type of investment vehicle that is structured as a publicly traded investment company by the Securities and Exchange Commission (SEC). Unlike open-end funds (commonly known as mutual funds) that continuously issue and redeem their shares at the net asset value (NAV), closed-end funds issue a fixed number of shares in an initial public offering (IPO). After the IPO, these shares are bought and sold on the open market, just like stocks or ETFs. The price of a closed-end fund’s shares fluctuates based on market forces such as supply and demand, and it can be at a premium or discount to the NAV.
High yields in closed-end funds are typically obtained by investing in higher-risk securities such as high-yield bonds (also known as junk bonds), leveraged loans, and other types of debt instruments, such as mortgage back Securities and other pass-through debt instruments. These securities offer higher interest rates due to their lower credit ratings. Closed-end funds may also use leverage, or borrowing to invest and amplify returns, but also increase risk.
Dividends in closed-end funds are typically paid out from the income generated by the fund’s investments. This could include interest payments from bonds or dividends from stocks. Most closed-end funds distribute dividends on a regular schedule—monthly, quarterly, or annually. It’s important to note that high dividend yields can be attractive, but they also can be a sign of higher risk. As always, investors should carefully consider their own risk tolerance and investment objectives.
My favorite place to investigate closed-end funds is through Quantum Online.
So Here are my top 5 closed-end funds. I have 10 but here are the 1st 5.
Aberdeen Income Credit Strategies Fund (ACP)
is a closed-end fund that primarily invests in loan and debt instruments across the globe. The objective is to seek a high level of current income, with a secondary objective of capital appreciation. The fund primarily invests in a diversified portfolio of income-producing securities, including corporate bonds, mortgage-backed securities, asset-backed securities, and other fixed-income instruments. ACP distributes income to shareholders every month, typically in the form of cash dividends. The current dividend is $1.20
Total investment exposure $510.3 million
Total common assets of $365.3 million
Total debt $145 million
Leverage Ratio 28.42%
Monthly Dividend $.010
Dividend Yield 21.35%
Stock Price on 10/23/23 $5.62
Stock price on 2/23/2024
Percentage Change from 10/23/23 to 2/23/2024 19.59%
Net Asset Value(NAV) $7.01 or 19.83% discount
Pioneer Diversified High Income Fund, Inc. (HNW)
seeks high current income with capital appreciation as a secondary objective. By investing in a diversified portfolio of fixed-income securities, including high-yield corporate bonds, bank loans, preferred securities, and government debt securities the company looks to not only obtain a healthy dividend stream but growth. The fund may also invest in equities and other income-producing assets. HNW distributes income to shareholders every month, typically in the form of cash dividends. The current dividend is $1.08
Total investment exposure $147.259 million
Total common assets $103.934 million
Total debt $43.325 million
Leverage Ratio 29.42%
Monthly Dividend $0.09
Dividend Yield 8.86%
Common Shares Outstanding 8,334,759 shares
Stock Price on 10/23/23 $9.94
Stock price on 2/23/2024 $11.18
Percentage Change from 10/23/23 to 2/23/2024 12.5%
Net Asset Value(NAV) $12.47 or 10.34% Discount
PGIM Global High Yield Fund, Inc. (GHY)
The Fund Company seeks to achieve its objective by investing primarily in high-yield fixed-income instruments of issuers located around the world, including emerging markets. Their investment of choice is primarily in below-investment-grade fixed-income instruments. With 47.3% of its assets in U.S. corporations, the company is well-diverse throughout the global market. GHY distributes income to shareholders every month, typically in the form of cash dividends. The current dividend is $1.26
Total investment exposure $669.644 million
Total common assets $524.644 million
Total debt $145 million
Leverage Ratio 21.61%
Monthly Dividend $0.105
Dividend Yield 10.91%
Common Shares Outstanding 40,923,879 shares
Stock Price on 10/23/23 $10.28
Stock price on 2/23/2024 $11.54
Percentage Change from 10/23/23 to 2/23/2024 12.26%
Net Asset Value(NAV) $12.85 or 10.19% Discount
The Western Asset High Income Fund II Inc. (HIX)
seeks to provide high current income, with capital appreciation as a secondary objective. The fund leverages its portfolio of high-yield corporate debt securities from both U.S. and non-U.S. corporations, with strategic allocations to emerging markets and other debt securities. HIX distributes income to shareholders every month, typically in the form of cash dividends. The current dividend is $0.58
Total investment exposure $447.198 million
Total common assets $319.543 million
Total debt $127.655 million
Leverage Ratio 28.55%
Monthly Dividend $0.04902
Dividend Yield 13.12%
Common Shares Outstanding 67,272,154 shares
Stock Price on 10/23/23 $4.19
Stock price on 2/23/2024 $4.385
Percentage Change from 10/23/23 to 2/23/2024 4.65%
Net Asset Value(NAV) $4.78 or 8.99% Discount
Credit Suisse Asset Management Income Fund (CIK)
Is one of the older closed-end funds, established on February 11, 1987. CIK does not focus on capital appreciation, the fund does not actively manage to grow capital gains. The fund company’s primary objective is to preserve capital while investing in U.S. high-yield corporate bonds and debentures. HIX measures its performance against the BofA Merrill Lynch High Yield Master II Constrained Index. CIK distributes income to shareholders every month, typically in the form of cash dividends. The current dividend is $0.27
Total investment exposure $221.163 million
Total common assets $155.336 million
Total debt $65.827 million
Leverage Ratio 29.76%
Monthly Dividend $0.02252
Dividend Yield 8.97%
Common Shares Outstanding 52,656,247 shares
Stock Price on 10/23/23 $3.023
Stock price on 2/23/2024 $3.025
Percentage Change from 10/23/23 to 2/23/2024 .17%
Net Asset Value(NAV) $2.94 or 2.72% Premium
The value and benefits of closed-end funds, which are often overlooked by most investors: With their diversity of assets they don’t have the restrictions and requirements compared to mutual funds. By using your trading skills you can exploit more flexibility in execution timing. Traders who are seeking regular cash flow can benefit from enhancing their dead money capital growth and can find these gems at discounts to the fund’s Net Asset Value(NAV).
Closed-end Funds offer a unique blend of flexibility, income, and specialized exposure. While they may be lesser-known, their benefits make them worth considering for a diversified investment portfolio.