Skim 9% of US Corporate Profits with High-Yield CEFs

US companies are raking in big profits, but are stingy with dividends, yielding only 1% on average. Two high-yield closed-end funds (CEFs) yield 9.7% on average, providing a $81 per month income stream for every $10,000 invested. These funds allow investors to tap into corporate earnings through high-yield bonds, with some CEFs yielding more than the average 6.7% corporate bond yield.

US companies are generating substantial profits, yet dividends remain modest, averaging around 1% for S&P 500 stocks. This situation presents an opportunity for investors to tap into corporate earnings through high-yield closed-end funds (CEFs). Two CEFs, for instance, yield an average of 9.7%, translating to an $81 monthly income stream for every $10,000 invested. This approach allows investors to benefit from corporate profits without relying on traditional dividend distributions.

The typical S&P 500 stock yields just over 1% today, but CEFs offer a significantly higher yield. For example, the DoubleLine Income Solutions Fund (DSL) yields 10.8%, while the Western Asset Inflation-Linked Opportunities & Income Fund (WIW) yields 8.5%. These funds invest in corporate bonds, including those from large and profitable companies like Amazon, which has a substantial debt load of $348.4 billion and pays regular interest on it.

Investors can also consider the SPDR Bloomberg High Yield Bond ETF (JNK), which yields 6.6% and has shown steady performance over the past three years. However, CEFs often outperform ETFs due to their active management and connections in the bond market. For instance, DSL has beaten JNK by a wide margin over the last decade.

CEFs are particularly attractive due to their discounts and high yields. For example, WIW is currently trading at a 9% discount to its net asset value (NAV). This discount can provide additional upside potential if the market recovers and the fund's NAV rises. Moreover, CEFs often distribute their income monthly, providing a steady cash flow for investors.

In conclusion, high-yield CEFs offer a compelling way to tap into corporate earnings and generate a regular income stream. While these funds come with their own risks, they provide an attractive alternative to traditional dividend stocks and ETFs. As always, investors should conduct thorough research and consider their risk tolerance before making investment decisions.

References:
[1] https://www.nasdaq.com/articles/lets-you-skim-9-us-corporate-profits-and-turn-them-cash
[2] https://www.tikr.com/blog/5-high-yield-dividend-stocks-with-safe-payout-ratios-below-75