Looking for $500 Per Month? Invest $20K in These 3 CEFs

Exotic, high-yield, covered call Exchange Traded Funds have become the latest flavor of the month in the individual investor world. While monthly passive income has strong appeal, there are both volatility and capital dilution risk aspects to the YieldMax and several other covered call offerings that can cause some investors to hesitate.  

While they may be less in vogue, there are still a wide range of Closed End Funds (CEFs) available from which to choose that can deliver double-digit APY and also deliver monthly payouts. With more conventional operations that are familiar to most investors, these CEFs are more reflective of standard approaches towards investing in stocks, bonds, and in other asset classes, such as real estate 

Since equity and interest rate markets fluctuate both up and down, professionally managed funds may sometimes trade both sides of the market in order to maximize gains. Funds that offer dividend payouts on a monthly basis are well aware of how competitive the arena is for attracting and keeping investment funds, so these managers need to consistently deliver the goods to stay in the game. 

The following three CEFs are examples of monthly dividend bond, equity, and REIT offerings that each yield over 10% annually, based on market price at the time of this writing. As such, a $20,000 investment in each would equate to over $6,000 cumulatively per year, or over $500 per month. 

PIMCO Income Strategy Fund

PIMCO Income Strategy Fund (NYSE: PFL)   

Yield: 11.48%

Annual Dividend Total: $2,296.00

Monthly Dividend: $191.33

Experienced traders may carry both long and short positions, which entails increased risks. Even savvy traders can get caught and sustain losses if they aren’t attentive or hedged properly. For a closed end fund focused on fixed income, a short position can entail unlimited risk if liquidity issues prevent a quick short cover in the event the manager has bet in the wrong direction. 

The Pacific Investment Management Company (PIMCO) is headquartered in Newport Beach, CA. Among its family of funds, the PIMCO Income Strategy Fund is interesting because it may carry both long and short positions on bonds. 

Yield	11.48%	1-yr return	13.93%
Market Cap	$382.12 million	5-yr return	8.53%
Avg. Daily Volume	$118,259 shares	10-yr return	7.57%
Expense Ratio	3.35%	Institutional Investors	74
Beta	0.63	AUM	$415 million

PFL deploys its $415 million AUM in its portfolio accordingly (top 3):

Sectors:

• High-Yield bonds: 31.73%
• US Government: 14.27%
• International Developed Market: 12.67%

Maturities:

• 3-5 years: 27.99%
• 5-10 years: 20.30%
• 1-3 years: 16.74%

Industries:

• Technology: 6.96%
• Healthcare: 6.00%
• Wirelines: 5.96%

Its total 1-year return is 17.13%, 3-year return is 25.86%, and its 5-year return is 44.40%. PFL’s short position is -3.06%. 

Calamos Long/Short Equity & Dynamic Income Term Trust

Calamos Long/Short Equity & Dynamic Income Term Trust (NASDAQ: CPZ)

Yield: 10.37%

Annual Dividend Total: $2.074.00

Monthly Dividend: $172.83

While the vast majority of managed funds tend to go long in the market, there are some who see opportunities in overbought securities. In a unique hybrid of strategies, the Naperville, IL based Calamos Long/Short Equity & Dynamic Income Term Trust combines them for augmenting their dividend and portfolio growth. The fund commenced in 2019. 

Long/Short strategies can be based on a number of factors. Here are two examples:

• Rival Competition: if a large government AI development contract was subject to bids from, Microsoft and Google, and Microsoft was to lose, Alphabet (Google) would be a stock to buy long, while Microsoft would likely already have some short pressure and the trend would be towards further selling.
• Geography: When President Trump enacted his reciprocal tariff strategies, the market dropped in April and then started rebounding back a few weeks later. However, stocks of  companies domiciled in countries that have yet to confirm a new trade agreement will be subject to higher tariffs, so those might be good short targets if already overbought or near their 52-week highs. Companies that might compete with them whose host countries have already confirmed their new trade deals, or domestic US companies who are rivals might be candidates for long buy strategies. 

As a prudent fund management company, Calamos has about 70.6% of its portfolio in long/short equities, with 13.7% in preferred securities and 15.6% in fixed-income securities. 

Yield	10.37%	1-yr return	20%
Market Cap	$319.22 million	5-yr return	11.57%
Avg. Daily Volume	62,808 shares	10-yr return	N/A
Expense Ratio	3.37%	Institutional Investors	56
Beta	0.82	AUM	$467.6 million

To illustrate the Calamos long/short strategy, as of July, the fund’s top 3 long positions were: 

• Microsoft (5.5%)
• Nvidia (4.6%)
• L3Harris Technologies (4.3%)

The fund’s top 3 short positions were:

• SPDR S&P 500 ETF Trust (-26.5%)
• Van Eck Semiconductor ETF (-6.9%)
• Apple (-1.8%)

Nuveen Real Asset Income and Growth Fund

Nuveen Real Asset Income and Growth Fund (NYSE: JRI)

Yield: 12.14%

Annual Dividend Total: $2,428.00

Monthly Dividend: $202.33

Chicago headquartered Nuveen Real Asset Income and Growth Fund invests the majority of its portfolio in global public equities and preferred stocks with a focus on the real estate, REIT and infrastructure sectors. The fund’s policies allow up to 40% maximum investment in debt securities, but no more than 10% in CCC+ or lower. It also allows for portfolio managers to hold as much as 75% in non-US securities. 

Yield	12.14%	1-yr return	17.86%
Market Cap	$363.54 million	5-yr return	11.72%
Avg. Daily Volume	126,843 shares	10-yr return	6.02%
Expense Ratio	2.09%	Institutional Investors	74
Beta	0.93	AUM	$370.4 million

As of July, portfolio allocation was (top3):

• Real Estate Common: 26.7%
• Infrastructure Common: 21.2%
• Infrastructure Preferred: 19.2%

The top 3 largest securities positions were:

• Energy Transfer LP: 1.5%
• Gaming and Leisure Properties Inc.: 1.4%
• Evergy Inc.: 1.3%

 

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.