I like to plan with flexibility in mind. When I’m preparing for vacations, I check the weather but stay adaptable. If a thunderstorm is coming, I shift plans rather than stress over constant updates. Weather changes, and being flexible allows me to enjoy my trip no matter what.
In the same way, there's too much obsession with economic data and Federal Reserve actions like rate cuts. While important, these events happen regularly. Economic data is released on a set schedule each month, and the Fed meets routinely, with extra meetings only if necessary. Fixating on these routine occurrences is like stressing over cold weather in December—it’s expected.
I’m not fixated on every move that surrounds the financial markets. The Fed meets regularly, and these events don’t need to upend my strategy. I stick to a balanced portfolio, a rate-agnostic portfolio that performs well in different market conditions and provides for my retirement through thick and thin. Let us now dive into my top picks.
Pick 1: BCX - Yield 6.6%
BlackRock Resources & Commodities Strategy Trust (BCX) is a CEF that, as its name implies, invests in resources and commodity companies.
BCX divides its exposure into three main categories: Mining, Energy, and Agriculture. The balance between these sectors frequently changes, and it is currently overweight in mining and underweight in agriculture. BCX also tends to be biased toward large-cap companies, with 90% of its exposure to companies with market capitalizations of $10 billion or higher.
While the CEF’s NAV has stabilized and is in a higher range than it was before COVID-19, its share price continues to trade at a discount to NAV. BlackRock has committed itself to closing the discount to NAV that many of its funds have been trading at. It has been doing this through making a tender offer to buy back shares for funds that are averaging a discount greater than 7.5% each quarter.
Inflation is slowing down and trending back towards the Federal Reserve's 2% target; however, as we all know, things are still expensive. Inflation measures the change in prices, not whether prices are high or low. Even though inflation has slowed down, commodity companies are benefiting from prices remaining at higher levels than they were before. That isn't likely to change, and with BCX, you can collect steady monthly distributions.
Pick 2: AWP – Yield 10.8%
Global REITs are operating with sound fundamentals and are not under significant pressure from prevailing rates. Yet, they trade at a significant discount to their net asset value, stretching your investment dollar further from this income-oriented asset class.
abrdn Global Premier Properties Fund (AWP) is a CEF with 60 top-tier global REITs across popular sectors, notably retail, healthcare, industrials, residential, and data center REITs. AWP’s top ten holdings represent 43.5% of the fund’s assets, and only ~65% of the CEF’s portfolio comprises U.S.-based REITs.
AWP reported $40.5 million in unrealized gains on its semi-annual report, a sum that fully covers a full year’s distributions. The CEF operates with a 19% leverage, which has been instrumental in its year-to-date market outperformance. We expect this momentum to continue as the Fed continues its QE (Quantitative Easing) to stimulate the economy.
Tailwinds are upon REITs, and AWP is well-positioned to benefit from lower borrowing costs and improving sector valuations, allowing you to sit back and collect a generous 10.8% yield.
Conclusion
I like my diet to have a healthy balance of vegetables, proteins, carbs, and the occasional treat. Just like with food, too much of anything can be harmful to your system. The same applies to your investment portfolio—getting caught up in the constant news cycle can derail your long-term goals.
With a diversified portfolio of balanced investments, our financial goals at High Dividend Opportunities are met no matter the changes in the economy. If those changes are more permanent, my portfolio has the flexibility to evolve and adapt, funded by all the recurring cash flows I receive. This is the value proposition of the Income Method and the benefit of income investing.
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