When shopping for a new smartphone, we tend to research and compare features, weighing options to find the one that best fits our needs and budget. Sometimes, though, we wish we could take the best aspects of different products and combine them into one. With investing, the good news is that this is possible—diversified funds allow you to tap into the strengths of various sectors, creating a balanced approach that maximizes income and growth potential. By holding a mix of high-quality assets in key sectors, these funds offer a unique way to get “the best of both worlds” within a single investment.
In this article, we’ll explore two top-notch diversified funds that combine the best of resilient and growth-oriented sectors, offering income and stability in today’s dynamic market.
Pick 1: BST – Yield 8.2%
BlackRock Science and Technology Trust (BST) is an actively managed CEF (Closed-End Fund) with 95 holdings as of September 30, 2024. The fund’s top positions are some of the biggest beneficiaries of the Artificial Intelligence boom.
BST’s sub-sector allocation fluctuates with market trends, with semiconductors currently dominating as the sector with the highest momentum and demand, followed by software and services.
BST does not utilize leverage in its investment strategy and estimates that 100% of its distribution amount in the 9 months of FY 2024 was sourced from capital gains. Its current $0.25/share monthly distribution calculates to an 8.2% annualized yield.
Since its inception ten years ago, BST has delivered market-beating total returns through a combination of NAV gains (double from its levels at IPO) and growing distributions.
Today, BST trades at a 6% discount to NAV, allowing you to dive into the tech sector at a modest bargain. This CEF presents a fantastic option and opportunity for those investors who don't have the interest or skill to pick individual tech stocks.
Being an income investor doesn’t mean you have to miss out on the gains from the tech boom. You can enjoy a steady monthly income from the robust growth in this rapidly expanding industry without the market price volatility affecting your emotional well-being.
Pick 2: UTF – Yield 7.4%
Cohen & Steers Infrastructure Fund (UTF) is a CEF with a significant focus on electric utilities. Source
UTF Factsheet, as of June 30, 2024
Six of the CEF's top ten holdings are electric utilities, and they are among the largest in the United States.
UTF Factsheet, as of June 30, 2024
UTF is actively managed with leverage to boost total returns to shareholders. The CEF reported a 30% leverage at a weighted average interest rate of 2.3%. 85% of the borrowing has rates fixed at 1.6% for a weighted average term of two years.
On its semi-annual report (as of June 30, 2024), UTF reported $442.1 million in unrealized gains on its investments, capable of fueling the CEF’s annual distribution for 2.5 years. Since its inception in 2004, UTF has maintained and grown its NAV while delivering consistent monthly distributions to shareholders. Its current $0.155/share monthly distribution calculates to a 7.4% annualized yield.
Conclusion
Investing with a strategy that blends strengths from different sectors can be an effective way to enhance both portfolio stability and income potential. Actively managed diversified funds like UTF and BST give investors the unique advantage of consistent income from high-quality assets across infrastructure and technology.
At High Dividend Opportunities, we prioritize highly diversified income sources to protect against market volatility, economic shifts, and business-specific risks. The broader our sources, the more reliable and sustainable our income becomes. That’s why we hold over 45 equity positions, including CEFs, ETFs, REITs, midstream MLPs, C-Corps, BDCs, and a robust collection of preferred securities and baby bonds. With this diversified approach, we aim to deliver reliable returns, regardless of market conditions, while maximizing income for the members of our community. This is the beauty of our Income Method, and the power of income investing.
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