Two Dividend Picks With +8% Yield

2 Magnificent Dividends With +8% Yield

Summary

• Years of near-zero interest rates have led to this high interest rate environment.

• Several companies are struggling because of this rapid change.

• We look at two securities that provide you with strong, high levels of income.

Have you ever experienced a time in your life when everything seemed to be going exactly the way you wanted? When you face challenges, you work to establish a firmer foundation for how you want things to run in your life. Tough times provide inspiration for a better future. 

For some sections of the market, recent interest rate hikes have been a blessing and not a curse. Years of low interest rates were a prime way of establishing a strong foundation with cheap fixed-rate leverage.

The risk here is that we all know interest rates are not going to stay high forever, so you want to make sure that you hold the best companies that can thrive when their margins start to compress.

Pick #1: HQH - Yield 9.7%

Tekla Healthcare Investors (HQH) is a Closed-End Fund (‘CEF’) with assets spread among 150 holdings, 80% of which are in the biopharmaceutical and biotechnology industry.

HQH does not use leverage in its investment strategy and distributes a fixed percentage of its NAV every quarter, making it a variable payer. As such, the CEF is in a good position to benefit from the market rebound while increasing shareholder distributions.

HQH distributes 2% of NAV on a quarterly basis under a variable distribution strategy. As a result, investors experience a decrease in payouts when the fund's NAV falls, which naturally safeguards the fund against asset liquidation at low prices. When NAV increases, HQH automatically increases its distributions; the process is transparent and easy to calculate.  Investors don’t have to hope for a raise or time the market to realize capital gains.

With the annual yield of 9.7%, you may lock in an even larger income stream at current discounted prices.

Pick #2: RQI – Yield 8.4%

Cohen & Steers Quality Income Realty Fund, Inc. (RQI) is a CEF and one of the largest, most experienced team of professionals specializing in real estate investing, with 221 holdings across real estate investments. The fund’s top holdings are some of the biggest and most prominent REITs tied to essential services in the modern economy.  The firm brings more than 35 years of experience in the U.S. public REIT sector and over 18 years in global real estate.

REITs are one of the best friends for an income investor. They pay no corporate tax as long as they distribute 90% of their earnings to shareholders. From a historical perspective, REITs are better positioned in this high-interest-rate economy because, on average, they maintain long-term, well-structured balance sheets with low leverage ratios. As such, public equity REITs have limited their exposure to the challenges of the current mortgage market. 

High-quality REIT operators are well-positioned to navigate this rate cycle through their balance sheet health and mostly fixed-rate debt. At current discounted prices, your investment in RQI works hard to generate reliable monthly income at an 8.4% annualized yield.

Conclusion

I like my investments to pay me regularly. And when these companies achieve their milestones and strategic goals, I want more significant incentives. Dividends are the best method to dip into successful companies' profits directly. As they continuously and increasingly serve society with their goods and services, I would like to be paid every step of the way. After all, financial responsibilities are continuous; why not the same for the returns from my investments?

Two picks with up to 9.7% yields for a rich and prosperous retirement.