Seeking Stability in an Unstable Market: Our Income Strategy for 2026

Markets entered 2026 priced for perfection with less-than-ideal economic conditions. Valuations remain historically stretched, even as economic cracks become harder to ignore – slowing growth, higher interest rates, rising unemployment, and collapsing momentum in darling growth stocks. When expectations are elevated, capital gains become very unreliable, and volatility will punish investors chasing yesterday’s winners.

This is where income shines. Cash flow does not rely on market optimism or multiple expansion; it is earned, paid, and spent as desired or reinvested, regardless of headlines. In overvalued markets, growing income is not about bold predictions; it is about positioning capital where valuation, structure, and cash generation do the work for you.

At High Dividend Opportunities, we are positioning our portfolio for continued income growth in 2026, not by chasing excitement, but by owning assets designed to pay, and raise their distributions. Several of our holdings have already delivered attractive distribution increases in recent months, reinforcing our view that income growth remains achievable even as market conditions are unpredictable. Let’s now dive into our top picks that are poised to grow their distributions in 2026.

Pick 1: RVT—Yield 6.8%

Royce Small-Cap Trust (RVT) is a CEF that invests in small-cap stocks. Over the past five years, a massive valuation gap has developed between large-cap and small-cap stocks, currently at levels we have not seen in decades.

YTD, we've seen the small caps rising and large-cap valuations coming down rapidly. All those growth stock darlings are in deep correction mode, while low P/E value stocks are surging. It remains to be seen if this is the rotation into value that we saw during the DOT-COM bust.

While history doesn't always repeat, it tends to rhyme. Stocks don’t keep going to the moon, gravity is real and it can be unforgiving. We expect the value-growth gap to close in the near term, and the last time that gap closed, RVT delivered spectacular returns relative to the popular large-cap focused indices.

RVT's top 10 list comprises names that you may have never heard of.

They don’t pay dividends, and don’t typically enter into the spotlight, and that is what makes them a good diversifier for our portfolios. RVT pays a variable dividend, determined from the average of the NAV in the trailing 12 month period, paid out at an annualized rate of 7.5%. This means, RVT's distribution will move higher if the fund’s NAV is higher today than it was last year.

RVT’s NAV is off to the races for 2026, so that is a good sign for higher distributions. The CEF is currently trading at an ~9% discount to NAV. That's a great valuation to be buying at.

Pick 2: NLY – Yield 12.1%

Annaly Capital Management, Inc. (NLY) is the largest publicly traded agency mortgage REIT. The company reported Q4 earnings with an economic return of 8.6% for the quarter and 20.2% for the year.

NLY’s book value increased primarily from earnings and unrealized gains in their portfolio, and a $0.06 increase in book value by issuing new shares above NAV. Notably, during FY 2025, NLY's book value increased by about $0.22 simply from raising equity at a premium valuation.

In addition to agency MBS, NLY’s portfolio is also diversified across investments in Residential Credit and MRS (Mortgage Servicing Rights). These strategies limited some of the downside volatility in book value last year and limited the impact of the rebound in agency MBS in Q4. Essentially, a balance of mortgage strategies makes NLY's book value less volatile.

NLY’s strength through the year has been its steadily climbing EAD (Earnings Available for Distribution). NLY is currently paying a dividend that is 13.8% of Q4 book value, indicating strong room for a dividend increase in 2026.

Conclusion

Markets will always be noisy. Media narratives shift by the day, Wall Street forecasts swing with every data point, and geopolitical risks surface without warning. None of that changes our objective. At High Dividend Opportunities, we are not in the business of predicting headlines; we are in the business of building portfolios that generate and grow income through them.

A disciplined income strategy provides something speculation can never: stability of cash flow when prices fluctuate, and sentiment deteriorates. While others react to volatility, we focus on collecting distributions, reinvesting thoughtfully, and allowing income growth to compound over time.

Confidence doesn’t come from knowing what will happen next; it comes from owning a strategy that continues to pay you while you wait. Join us today to explore the Income Method.