Bargain Alert: 2 Big Dividends, Up To 11% Yield
- High Dividend Opportunities
- Apr 10
- 4 min read
There are many things the news cycle loves to keep us preoccupied with the spiral of pessimism. After all, they get paid to keep us on the edge of our seats. Shifting its focus from the obsession over the Federal Reserve's next moves, the hot topic of the season is tariffs and trade wars. Everyone likes to make projections of the potential impact of President Trump's tariffs, and recession probabilities continue to fluctuate, with JPMorgan (JPM) recently raising its forecast to 40%. Historically, economists rarely peg the likelihood of a recession above 90% or below 10%, which underscores the inherent difficulty in precise forecasting.
Predicting what will happen in the markets is easy; predicting when it will happen is nearly impossible. Markets have been volatile, with sentiment shifting rapidly – some investors are selling to accumulate cash, while others are piling into the bargains. Despite what happens around the global trade landscape, there are underlying concerns like rising unemployment, weakening consumer confidence, persistent inflation, and massive pile of national debt.
This is precisely when disciplined, income-focused investors can thrive. After all, when times are tough, cash flow is king! Hence, instead of trying to time the bottom or predict the market’s next move, we at High Dividend Opportunities prioritize building a resilient income stream from sectors that are vital to the national economy. Let’s dive into our top picks:
Pick #1: UTF – Yield 8%
Utility stocks will be relatively unscathed by tariffs because most of their revenue comes in U.S. dollars from U.S. customers. They remain well-positioned to benefit from the push to boost the domestic industrial base, as it results in a higher demand for electricity, natural gas, and water.
With 272 portfolio holdings, Cohen & Steers Infrastructure Fund (UTF), yielding 7.5%, provides diversified exposure to utility and infrastructure companies. The fund’s top ten holdings represent some of the largest electric, gas distribution, and midstream companies in the U.S.
About 60% of UTF’s holdings are US-based companies, and the CEF operates with a ~28% leverage to boost returns from this vital sector. UTF’s use of leverage and active management has resulted in the CEF’s significant outperformance against its passive sector-focused counterparts.
UTF has delivered growing monthly distributions since its inception in 2004. Its $0.155/share monthly distribution calculates to a 8% annualized yield.
The effectiveness of tariffs is still unproven, but it could result in some expansion of industrial activity in the United States. This bodes well for utility and infrastructure companies in the mid to long-term. In the interim, we bank on the stable revenues of utility companies and generous distributions from this diversified CEF.
Pick #2: THQ – Yield 11.3%
Healthcare stocks have been taking it on the chin since Mr. Robert F. Kennedy Jr. was nominated and confirmed as the Secretary of Health and Human Services. Mr. Kennedy has long been skeptical of vaccines and has promoted numerous theories about them, and also publicly criticized popular GLP-1 weight-loss drugs. Along with it comes the market volatility associated with the tariff announcement (and subsequent pause), and the threat of incoming tariffs on pharma imports into the United States.
It is important to remember that healthcare provides largely necessary services, and the companies are viewed as defensive plays, capable of providing some ballast in periods of volatility. During the Great Financial Crisis, sectors within healthcare continued demonstrating strong revenue growth, implying the non-cyclic nature of illnesses and ailments. People will continue visiting doctors, doing necessary diagnostics, and taking required prescription drugs.
abrdn Healthcare Opportunities Fund (THQ) is a CEF (Closed-End Fund) with $1 billion in managed assets and investments in 111 companies. The fund’s top holdings, which represent ~45% of the invested assets, are some of the largest US-focused biopharma, medical devices, and health insurance firms.
THQ operates with a 21% leverage, carrying a variable interest rate of SOFR + 0.95%, positioning the fund for direct tailwinds from rate cuts. The CEF distributes $0.18/share, calculating to a 11.3% annualized yield.
THQ lets us invest in a necessary sector backed by the undeniable truth that America’s population is aging, and with age comes an increased dependence on healthcare services. Political talks and promises cannot change that.
Conclusion
In uncertain markets, consistent and predictable cash flow is king. Both THQ and UTF are backed by businesses that experience inelastic demand through the tide of times. Both pay monthly distributions. While THQ provides exposure to the ever-growing healthcare sector,, UTF provides access to the powerhouses of the American economy. By focusing on essential sectors and prioritizing steady cash flow over market speculation, we position ourselves for long-term financial stability – regardless of where the broader economy moves next.
At High Dividend Opportunities, we maintain a highly diversified portfolio of income-producing securities to enable a stress-free retirement. Some of our holdings do well in a strong economy, while others thrive in a weak economy. It is impossible to predict what we will face in the near term. Hence, we protect ourselves from the unknown with diversification. With more than 45 securities in our model portfolio, we tap into income streams across all sectors of the economy. We call this approach the Income Method – a mission built to deliver lifelong income and long-term financial peace of mind.
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