High Yield
If you are retired, retiring soon or in the distribution phase of life and need to build an income portfolio see the above high yieldings investments for further research. Investment options are grouped by the following equity and fixed income asset classes:
- Covered Call
- Cryptocurrency
- BDC
- General Equity
- Real Estate
- Utilities / Infrastructure
- High Yield Bonds
- Collateralized Loan Obligation (CLO)
- Hybrid or Multi-Asset
- Senior Loan
Each asset class is then sorted by yield from lowest to highest. Typically the higher the yield (or return) the higher the risk of an investment.
Terminology
ETF – Exchange Traded Fund. A basket of securities that trades on an exchange just like a stock does. ETF share prices fluctuate all day as the ETF is bought and sold; this is different from mutual funds, which only trade once a day after the market closes.
BDC – Business Development Company. An organization that invests in small and medium-sized companies as well as distressed companies. A BDC helps these firms grow in the initial stages of their development.
CEF – Closed End Fund. A type of mutual fund that issues a fixed number of shares through one initial public offering (IPO) to raise capital for its initial investments. Its shares can then be bought and sold on a stock exchange, but no new shares will be created, and no new money will flow into the fund. Closed-end funds are usually actively managed, and typically concentrate on a single industry, sector, or region. Source: Investopedia
NII % – NII Coverage. The percentage of a fund’s distribution covered by net investment income (NII), which is the interest and dividends earned by the fund less expenses. Most fixed income CEFs set their distribution based on NII, so ratios near or above 100% are safer. Equity CEFs rely more on capital gains to fund distributions, making NII Coverage less indicative of the safety of an equity CEF’s distribution. Source: Simply Safe Dividends
Leverage – This is the percentage of a CEF’s assets funded by debt and preferred stock rather than capital contributed by shareholders. Leverage magnifies investment gains and losses, increases volatility, and can reduce a fund’s earnings when borrowing costs rise. We prefer low leverage.
Total Return % – The total return (capital gain/loss and dividends combined) for each of the previous 5 years.
Important Notes:
*Most of the investment listed above do not meet IRS requirements to qualify for the lower tax treatment. As such these ‘non-qualified’ investments are best suited to be held in tax-advantaged accounts such as IRA’s and 401k’s. Check with your tax professional.
*These are not recommendations, but starting points for further research, always do your own due diligence.