The market’s fall pullback is starting to reverse itself, but don’t worry: there are still bargain dividend payers yielding 7.4%+ dividends to be had out there.
But investing (along with everything in our lives!) has changed. You simply won’t get safe, high payouts by clutching to old habits and buying big-name, high-yielding S&P 500 stocks. The real dividend bargains are in closed-end funds (CEFs), which give you higher payouts, greater safety and often better returns over the long haul.
To show you what I mean, let’s line up three S&P 500 “dividend darlings” against the CEF competition and see how they compare. (Spoiler: it’s a blowout win for CEFs!)
AT&T: Big Dividend Lousy Return
AT&T (T) is a stock so old my grandmother has had it in her portfolio since before my mother was born. Ma Bell has been known as a huge income producer, with enticing 5%+ yields; today the stock’s yield is above 7%.
Such a big payout sounds like a slam dunk, so why not pick it up? To be honest, there are many reasons why this would be a bad move.
For one, AT&T’s net income fell 25% in 2019 from the prior year and has so far fallen 31.1% in 2020. As well, the company’s assets are barely growing as fast as its debts. Even if we ignored all of that, AT&T has badly underperformed the market over the long haul, even when you include its dividend!
The stock has done much worse than the alternative I’d suggest: the Liberty All-Star Growth Fund (ASG), which is full of companies that have beaten AT&T over the long haul, like Amazon.com (AMZN), Microsoft (MSFT) and Alphabet (GOOG).
Plus, ASG gives you much more diversification than buying