A Smart 6% Dividend Strategy For The Omicron Era

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The Omicron Edition Is Here — What Does This Mean for Us Dividend Investors?

Simple—we’ll just do what we did The last Time COVID Spooked Markets: Tech-Focused Buy Closed-End Fund (CEF) With huge payouts!

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my . a member of CEF Insider service will remember that we did exactly that while shopping in March 2020, during the initial market pandemic. BlackRock Science and Technology Trust II (BSTZ) When it gave a return of 7.3% and traded at a discount of 6.6% against the NAV. After that we found it giving a good return of 21% in just two months!

Our first indication that tech is now the right thing to buy came into the chaos of last Friday, with all countries seeing their markets fall, but interestingly only the tech-focused ones. Nasdaq 100
NDAQ
(QQQ)
QQQ
fell less than 2%

It’s telling, because if governments around the world do new shutdowns, the last sector to suffer will be. Remember that as with benchmarks, the technology was a beacon for investors throughout the pandemic Invesco QQQ Trust (QQQ) Taking the S&P 500 out of the March 2020 crash.

If Omicron is bad enough to roll back the lockdown, technology will be less affected as the lockdown makes people rely more on technology for basics in life. And if the Omicron isn’t as bad as scientists are concerned, the technology still stands to gain, as it has become an integral part of our everyday lives.

If you want to play the rise of technology and still hedge against volatility, consider a CEF called Nuveen Nasdaq 100 Dynamic Overwrite Fund (QQQX).

This 6% yield gives you exposure to similar stocks in the NASDAQ 100 index—large caps like Apple
AAPL
(AAPL), Microsoft
MSFT
(MSFT)
And Alphabet (GOOGL) –But with a twist: QQQX sells call options (gives buyers the option to buy their holdings in the future at a higher price) on its portfolio in exchange for cash, which it then passes on to investors.

The value of those options contracts increases as volatility increases, which is why QQQX outperformed all indices from the start of the sell-off until a few weeks later, when the market began to adjust to the new COVID reality.

This shows why selling in a panic market and going for cash is the worst thing you can do. Instead, we seek to capitalize on a pullback while hedging our returns with high dividends and a smart approach, such as QQQX’s options-selling strategy, which best performs in stormy markets. This makes the QQQX a good way to drive an ommicron wave – at least for a while until we know if it’s going to be truly disruptive.

Michael Foster is Lead Research Analyst Contrarian Outlook, For more income ideas, click here for our latest report”Indestructible Income: 5 Bargain Fund with a safe 7.3% dividend.,

Disclosure: none

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