With the market at all-time highs and dividend deals becoming increasingly scarce, investors are turning to closed-end funds (CEFs) to find income opportunities. Five CEFs are highlighted, offering distribution rates between 5.7% and 11.7% and trading at discounts of 12% to 18%.
One of the highlighted CEFs is General American Investors (GAM), which focuses on large-cap companies with above-average growth potential. With a 50-year track record and an annualized total return of 12.7%, GAM trades at an 18.4% discount to its Net Asset Value (NAV). Despite mirroring the S&P 500, GAM lags slightly behind the benchmark, leading to its discounted price.
Royce Value Trust (RVT) stands out as the first small-cap closed-end fund, investing in small-cap companies with attractive valuations. With a distribution rate of 7.3% and trading at an 11.8% discount to NAV, RVT has outperformed its benchmark, the Russell 2000, in recent years. However, an indexed small-cap value strategy has consistently outperformed RVT over time.
Neuberger Berman Next Generation Connectivity Fund (NBXG) offers exposure to tech companies with significant growth potential in the fifth generation mobile network and future generations of mobile network connectivity. With a distribution rate of 10.1% and a 16.4% discount to NAV, investors can access top tech stocks at a discounted price through NBXG. Despite launching during the tech sector’s struggles in 2022, the fund has maintained pace with other tech funds.
abrdn Healthcare Investors (HQH) focuses on healthcare companies, particularly in the biotech sector. With a distribution rate of 11.7% and a 15.6% discount to NAV, HQH offers income opportunities in a sector that remains perennially popular. Despite changing ownership, HQH retains its core strategies and portfolio composition, although its performance lags behind other healthcare index funds.
Kayne Anderson Energy Infrastructure (KYN) capitalizes on the rally in the energy sector in 2024, with a focus on traditional oil, natural gas, and LNG midstream firms. With a distribution rate of 9.1% and a discount to NAV of 15.2%, KYN uses moderate leverage to enhance its yield. However, with the energy sector currently performing well, some investors may prefer to wait for a more favorable entry point to invest in KYN.
Overall, these five CEFs offer income-seeking investors an opportunity to access high-yield dividend stocks at discounted prices. While each fund has its unique investment strategies and focuses, they all provide an alternative to traditional income-generating assets in a market environment where such opportunities are scarce.
