My best advice as the dawn of 2022 is this: Ignore the media’s constant beating about inflation and supply-chain issues—these are the two boogeymen. nowhere near Danger everyone thinks they are!
In fact, the panic-ridden headlines signify an opportunity for either of us income-seekers. So let’s go ahead and tap into these investor’s fears for dividends of up to 10%, plus market-crushing returns as the rush to (inevitably!) our view comes around.
Signs of a supply-chain revival
More data will come in the next few weeks to clear things up, but there’s still a strong indication that the trade press’s doomsday—rising inflation, stock market corrections and tighter corporate gains—is not over.
This is because pundits are ignoring the fact that the supply chain is in the early stages of healing. The proof of this is in a small report of MasterCard (MA) at the expense of the holiday season.
There’s a lot to unpack in this chart, but the total retail numbers matter here. Compared to the end of 2020, shoppers increased their spending by 8.5%. More importantly, they increased their spending by 10.7% compared to the pre-pandemic year of 2019.
the main thing is that there are clearly supply-chain issues No Preventing consumers from buying goods. Despite endless stories of empty shelves, shoppers had no problem finding what they wanted to buy—in abundance!
So who benefits from alleviating supply-chain concerns? Easy: Large US retailers like Home Depot (HD), Best Buy (BBY) And Walmart (WMT). In other words, the same large cap stocks that gave great returns to investors in 2021.
Most people would like to play off an emerging trend like this by buying these stocks either directly or through an ETF like Consumer Discretionary ETF (XLY). but were Closed-End Fund (CEF) buyer first and foremost, and for a Very Good Reason: CEFs Pay Huge Dividends! The average yield across all CEFs is hovering around 7% at the time of writing this.
So we’ll leave out XLY and its 0.5% yield and look at CEF like Liberty All-Star Equity Fund (USA), which has a number of stocks prepared to profit from the free flow of goods, including Amazon.com (AMZN), PayPal Holdings (PYPL) And Visa (V).
It’s also a solid performer, topping both XLY and the major S&P 500 index funds by total return last year. And the USA did so while paying an unheard of 10% yield! In other words, about a third of the returns you’re seeing from this fund below were in safe dividend cash.
Doubt on 2022 stock surge? This CEF is for you
There’s a flipside to those gains, though: With both funds beating the S&P 500, you might think that the higher consumer spending trend is already in price in 2022.
I don’t agree with that take, but if that’s your idea, you might want to consider Ultra-Diversified Nuven S&P 500 Dynamic Overwrite Fund (SPXX), Which holds the entirety of the S&P 500, so you get access to consumer stocks and other sectors of the index, such as financial services, healthcare, technology, real estate and industry.
The twist here is that SPXX sells call options on its holdings, a prudent move that increases your earnings and helps protect your investments from recession.
Here’s how it works: SPXX sell-call options are contracts whereby the fund sells another investor the right to buy its stock at a certain share price in exchange for a cash payment, known as a premium. goes. This provides bearish protection to the seller, as it allows them to keep the premium no matter what happens, and the option expires when the stock goes down.
This means that the SPXX carries less risk than an index fund or individual stocks, while providing an additional income stream that the fund can give you. That’s why the SPXX dividend is 5.3%, which is more than four times the S&P 500’s average yield of 1.3%.
Michael Foster is Lead Research Analyst Contrarian Outlook, For more income ideas, click here for our latest report”Indestructible Income: 5 Bargain Fund with safe 7.5% dividend.,