18%-23% Dividend Yields: One CEF To Sell, One To Buy

Summary Structuring a defensive passive income portfolio with 7.5%–8.5% yield is feasible through optimization, due diligence, and diversification. Yields above that should not dominate core portfolios but can enhance yield in a tactical allocation sleeve if risk is properly calibrated. In this article, I detail the case of an 18% yielding vehicle which I view as an attractive buy. I also analyze a popular 23%-yielding pick that I consider a yield trap. Andrii Yalanskyi/iStock via Getty Images Stress-free dividend investing and 18% to 23% yielding picks are structurally incongruent items. Given that the long-term risk-free reference rate is around 5%, then layering 150 bps to 250 bps of risk premium on top of that would This article was written by Roberts Berzins, CFA 16.23K Followers Follow Roberts Berzins has over a decade of experience in the financial management helping top-tier corporates shape their financial strategies and execute large-scale financings. He has also made significant efforts to institutionalize REIT framework in Latvia to boost the liquidity of pan-Baltic capital markets. Other policy-level work includes the development of national SOE financing guidelines and framework for channeling private capital into affordable housing stock. Roberts is a CFA Charterholder, ESG investing certificate holder, has had an internship in Chicago board of trade (albeit, being resident and living in Latvia), and is actively involved in "thought-leadership" activities to support the development of pan-Baltic capital markets. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.