Contrarian View: Why This 8% Dividend Fund Could Outperform the Market

Despite pessimistic outlooks, the economy is strong, with surging revenue across sectors and accelerating sales in most industries. The Federal Reserve's GDPNow indicator shows growth above 3%, far exceeding economists' estimates. This positive trend is reflected in funds like Adams Diversified Equity Fund (ADX), which has posted a total return topping the S&P 500 since the end of 2022. With a strong economy and positive outlook, it's a good time to be bullish on stocks and CEFs like ADX.

Despite pessimistic outlooks, the economy is strong, with surging revenue across sectors and accelerating sales in most industries. The Federal Reserve's GDPNow indicator shows growth above 3%, far exceeding economists' estimates. This positive trend is reflected in funds like Adams Diversified Equity Fund (ADX), which has posted a total return topping the S&P 500 since the end of 2022. With a strong economy and positive outlook, it's a good time to be bullish on stocks and CEFs like ADX.

ADX, a well-diversified closed-end fund, has shown impressive performance. It holds almost 100 individual stocks, with a significant portion invested in top holdings like Microsoft (MSFT), NVIDIA (NVDA), and Apple (AAPL). Over the long term, ADX has outperformed the S&P 500 and the Morningstar U.S. CEF U.S. Equity Index on both a price and NAV basis ADX Vs. SPYI: Which High-Yield Fund Is The Better Buy? It Depends^[2]. This strong performance is particularly notable given that ADX is not leveraged and has a relatively low expense ratio of 0.56% ADX Vs. SPYI: Which High-Yield Fund Is The Better Buy? It Depends^[2].

The fund's attractive distribution yield of 8.28% with quarterly payouts adds to its appeal. However, it is essential to note that a significant portion of this payout comes from realized capital gains rather than dividends from holdings. This means that while ADX generates meaningful cash flow, its dividend payouts can be erratic ADX Vs. SPYI: Which High-Yield Fund Is The Better Buy? It Depends^[2].

ADX's performance is a testament to its active management and strategic focus on high-quality stocks. Its top holdings are heavily concentrated in technology stocks, which have been a significant driver of the market's growth. However, this concentration also means that ADX's performance is more sensitive to the performance of these top holdings.

In contrast, the NEOS S&P 500 High Income ETF (SPYI) offers a different investment approach. As an ETF, SPYI does not trade at a discount or premium to NAV, providing a more stable investment experience. SPYI generates its payouts primarily through cash flows from selling covered calls rather than selling its underlying holdings ADX Vs. SPYI: Which High-Yield Fund Is The Better Buy? It Depends^[2]. This strategy can limit upside potential but provides a more consistent income stream, which can be particularly appealing to retirees.

For total return investors, ADX's long history of outperformance and lower expense ratio relative to SPYI make it a compelling choice. However, for income-focused investors, especially retirees, SPYI's higher yield and monthly payout structure may be more attractive.

In conclusion, the strong economic indicators and ADX's impressive performance make it a promising investment option. However, investors should carefully consider their risk tolerance and investment goals before making a decision. Both ADX and SPYI have their unique advantages and may fit different investor profiles.