CHAPTER 6 Get Higher Yields (and Maybe Some Tax Benefits)
Certain types of stocks pay higher yields than your typical dividend stock. These include closed-end funds, real estate investment trusts (REITs), business development companies (BDCs), master limited partnerships (MLPs), and preferred stocks. While these types of stocks are lesser known and can be a little more complicated, they are worthy of your consideration. Additionally, MLPs have unique tax implications.
Let's start with the simplest: closed-end funds.
Buying $1 in Assets for $0.90
You're probably familiar with mutual funds. Those are investments where your funds are pooled with other investors' money and the fund manager buys a portfolio of stocks, bonds, or other assets. The price of the fund is equal to the value of the assets in the fund divided by the number of outstanding shares.
For example, if the Marc Lichtenfeld Dividend and Income fund (which I operate out of Marc Lichtenfeld's Authentic Italian Trattoria's back office) has $10 million under management and there are one million shares outstanding, the fund is worth $10 per share ($10 million/one million shares = $10). If tomorrow the stock market rises, the value of the assets goes up to $10.5 million, and the share count remains the same, the fund will be priced at $10.50 per share ($10.5 million/one million shares = $10.50).
Anyone who wants to own the fund buys it directly from the fund company and pays $10.50 per share. The mutual fund company ...