The Safest High Yield Investments For The Rest Of 2014
Tue, Jun 11, 2013
There are very few options left for investors looking for high-yield investments.
The market rebound has swept across all asset classes. Prices are up and yields are down.
The S&P 500 yields just over 2% in dividends.
High-yield certificates of deposit (CDs) yield less than 2%.
The yield on the 10-year U.S. Treasury bond has risen sharply in the past month. It still pays a mere 2.14%. And with a rate that low, they carries far more risk and little potential reward.
Even high quality real estate investment trusts (REITs), which are traditionally a great high-yield investment, yield as little as 5% right now.
There just aren’t many options for investors looking high-yield investments for the rest of 2014. And safe high-yield investments are nearly impossible to find. But there is one option which offers less risk and higher yield than most any other investment right now.
The Best Kept Secret in Safe High-Yield Investments
One of our long-time favorites in the high-yield sector are in a small sector of the market that most investors don’t even know about.
Simply put, if you’re looking for yield, the place to be is in high-yield closed end funds (CEFs).
The advantages of CEFs over other investments are many. They offer instant diversification. Many of them have low fees. They also allow investors to invest in some great investments like convertible bonds.
The main advantage for High Yield Investors though is, well, a safe high yield. CEFs often offer high distribution rate including dividends and return of capital. They also often trade at a discount to their net asset value (NAV). And if bought when they are trading at a 10% discount, it’s like paying 90 cents on the dollar.
Here are three of the Safest High-Yield Investments For The Rest Of 2014.
Top Three Safe High-Yield Investments for 2014
Calamos Global Dynamic Income (NYSE:CHW) – is managed by Calamos Asset Management, one of the leading convertible and high-yield bond investment managers in the world.
The high-yield CEF invests in a number of bonds and stocks. Bands make up 31% of its portfolio and stocks 52%. Its top stock holdings include Apple, Nestle, Samsung, and other large, growing, and consistent dividend-paying stocks.
The fund currently trades at a discount to NAV of 9%. So that provides a high margin of safety against a market downturn.
It also pays out an annual distribution rate of 8.50%. And it pays it all in monthly installments.
Credit Suisse High Yield Bond (NYSE:DHY) – is a high-yield bond CEF.
The average premium over the NAV over the last year has been 6.18%. The premium has now fallen 1.27%, less than two percent away from its lows.
It currently pays a monthly distribution of 2.65 cents for an annual distribution rate of more than 10%.
BlackRock Corp High Yield VI (NYSE:HYT) – is another high-yield investment fund which offers a particularly high level of safety to investors.
It invests primarily in high-yield debt. Some of its top holdings include debt from Ally Financial and Icahn Enterprises – both of which have a 7% coupon rate.
The fund currently pays a distribution rate of 8.54%. It also trades at a discount to its NAV of 2%.
You Don’t Have to Take High Risks to Earn High Income
Again, there aren’t many safe high-yield investments available right now.
When the next correction comes, there will be plenty of opportunities to buy high-yield investments at better prices.
Rest assured, a correction will come. There’s always a correction. Or worse.
That will be the opportunity to really load up on high-yield investments with even more safety. Until then there aren’t many, but CEFs offer an extra degree of safety for investors looking for high yield right now.
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