With High Income, Don’t Believe Your Eyes

There's always a catch

John Rekenthaler 3 November, 2021 | 11:36AM
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A closer look could be well worth your while

Say What?

An exemplary reader referred me to a recent Forbes article, called “3 Funds That Let You Retire on Dividends Alone.” (Every reader is good, but a reader who submits a column idea rates as exemplary.) Wrote the reader, “John, these funds have the possibility of declining in value, but they are always presented as being fairly risk-free. Please do an article that exposes the risks.”

Your wish, my command.

The author’s recommended funds are closed-end funds. (Once popular enough to challenge their mutual fund cousins, closed-end funds have become an industry backwater.) According to the author, Liberty-All Star Growth (ASG), Gabelli Equity Trust (GAB), and Clough Global Opportunities (GLO) each pay annual dividends exceeding 7%. Given that those funds invest solely in equities, that figure arouses suspicion. How on Earth, in today’s marketplace, can stock funds yield more than 7%?

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

John Rekenthaler

John Rekenthaler  John Rekenthaler is vice president of research for Morningstar.