Debt-ceiling discussions have created widespread speculation in the markets, opening up a smart opportunity for savvy investors who can now buy a closed-end fund (CEF) with a 7% yield that has constantly been on their watchlist.
The Nuveen Nasdaq 100 Dynamic Overwrite Fund (QQQX) is a solid choice for investors wanting to receive higher dividends than a NASDAQ index fund while earning money from volatility. QQQX operates similarly to a NASDAQ index fund but automatically sells call options on its portfolio to protect itself and gain additional income.
The holdings of QQQX, including all of the large-cap tech giants that are widely recognized, are similar to those of the Invesco QQQ Trust (QQQ), which exclusively tracks the NASDAQ 100. QQQX has more than $1.2 billion in equity holdings, and by selling call options, it can generate cash premiums equating from 2% to 3% of its asset value, which the fund distributes as dividends to shareholders.
Furthermore, QQQX’s dividend yield is more than 3% due to the 0.8% dividend yield it gets from its equity holdings. Capital gains from its portfolio typically contribute to the majority of its total return, which includes the rest of the dividends.
During times of increased volatility, the fund’s option strategy is successful, and the current debt-ceiling uncertainty could cause the volatility to surge, offering investors an excellent entry point.
The Debt-Ceiling Scare
In 2011, US Congress’s actions almost resulted in a default on the national debt, which significantly impacted the stock market. However, the current situation is different, as the markets have already realized that Congress’s political wrangling over the debt ceiling is predictable and more of a political issue, consisting of last-minute deals, inflated rhetoric, and warnings of a default from both parties.
Historically, QQQX has fared well in periods of volatility, although the ongoing uncertainty surrounding the debt ceiling could trigger intermittent dips in the market moving forward.
Forget about the debt ceiling and take advantage of the five CEFs that I’ve outlined here, which offer a 10% dividend yield and are relatively low-priced. Each of these funds has been thoroughly analyzed and researched, and investors may reap a profit from them over the next 10 to 20 years.
Investors are encouraged to purchase these five “lifetime profit” funds now at a discounted price and start receiving high dividends nearly immediately.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.