If you have $100,000 to invest, you can easily use it to unleash a dividend stream that pays you $940 a month. That’s $11,280 a year in dividends—on just $100K!
I know you’re probably thinking this sounds too good to be true (and you should be!), especially when 10-year Treasuries dribble out just 0.7%, and the typical S&P 500 stock isn’t much better, with a 1.7% yield.
You’re not retiring on either one of those meager payouts!
But $100,000 invested in a fund with an 11.3% dividend yield (like the one we’ll dive into below) gives you a good start toward clocking out, and on a modest nest egg, too.
The nice thing about this approach is that you’ll still invest in blue chip companies like Mastercard (MA), Deere & Co (DE) and PepsiCo (PEP). That’s the real magic of this strategy: it lets you take low payers like these (PepsiCo is the highest yielder of this trio, at 2.9%) and “squeeze” them for a far bigger payout. Here’s how it works:
Step 1: Open a Brokerage Account
This isn’t really a step for many people—if you’ve read this far, you probably already have a trading account. No matter what kind of account it is, you’re fine to use it (so long as it lets you trade US stocks, of course): there’s nothing exotic about the funds we’re going to target with this strategy. They trade on the major markets, just like stocks. Recommended For You
If you don’t have $100K in your account already, go ahead and transfer it in.
Step 2: Buy a Closed-End Fund
Next, you’ll need to purchase a closed-end fund (CEF). The name we’re targeting today is the Gabelli Equity Trust (GAB). Let’s get into a little more detail on both CEFs in general and GAB in particular.
First, a CEF is like a mutual fund or an exchange-traded fund (ETF), but with some key differences. Unlike mutual funds, whose values are reconciled and unit prices are set after each trading day, CEFs trade during the exchange’s opening hours, just like an ETF or a regular stock.
And unlike ETFs, a CEF has a fixed amount of shares that are established when the fund holds its IPO. While ETFs can, and do, increase their total number of shares outstanding, CEFs do not, which helps keep them small and more manageable. An ETF like the SPDR S&P 500 ETF (SPY) can balloon to have a whopping $278 billion in it, where the biggest CEF has just $4 billion in assets. GAB is much smaller, with $1.3 billion.
GAB is managed by a group of value investors who focus on high-quality, mostly mid-cap and large-cap stocks. This team is headlined by famed value-investing guru (and Warren Buffett disciple) Mario Gabelli. Mario and his team look for companies with reliable cash flow and rising profits, which is why the fund owns Mastercard and PepsiCo.
Unlike ETFs, which usually pay tiny dividends, GAB (like most CEFs) focuses on maximizing dividends to shareholders; it does this by collecting payouts from the companies it holds and rotating assets and occasionally taking profits, which it then gives to shareholders in the form of dividends. That’s one way the fund can sustain a double-digit dividend.
There’s another part to the fund’s strategy, too: a careful use of leverage—by borrowing to invest, Gabelli and his team can enhance their portfolio’s returns, boosting its profits (and your payouts) further. Leverage, of course, also amplifies losses, a risk Gabelli mitigates by targeting companies trading below their intrinsic value and by keeping his leverage manageable—right now, the team has borrowed against roughly 25% of the portfolio.
Leverage is a particularly smart strategy today, with the cost of borrowing essentially at zero.
Now let’s take an exploded view of our GAB investment, so we can see exactly what we’ve got on the line here, and how much we’re getting back in dividend cash:
Step 3: Wait Two Months
After we’ve bought our shares, the last part is the easiest: just wait for the checks to roll in.
GAB pays dividends every three months, with the next payout coming sometime around December 14. That means in about two months, an investor who puts $100K in now will have $2,830.05 in time for Christmas.
If you want to set this up as a recurring income stream, all you have to do is set an automatic-payment-transfer from your brokerage account to your bank account for $943.35 every month, and GAB’s dividends will appear in your account—in cash.
Disclosure: noneMichael FosterI have worked as an equity analyst for a decade, focusing on fundamental analysis of businesses and portfolio allocation strategies. My reports are widely read by analysts and portfolio managers at some of the largest hedge funds and investment banks in the world, with trillions of dollars in assets under management. I’ve been traveling the world since 1999 and have no plans to stop. So far, I have lived in NYC, Hong Kong, London, Los Angeles, Seoul, Bangkok, Tokyo, and Kuala Lumpur. I received my Ph.D. in 2008 and continue to offer consulting services to institutional investors and ultra high net worth individuals.
When a global crisis – such as the COVID-19 pandemic – strikes, companies face difficult choices around issues like layoffs, talent and prioritizing corporate purpose beyond shareholder value. At Booz Allen, one of the world’s largest IT consultancies, CFO Lloyd W. Howell, Jr., was faced this year with a wholesale transition to remote work while also looking after the needs of the company’s 27,000 employees. Remarkably, Booz Allen has avoided any layoffs despite the extremely challenging global environment.
I recently conducted a Q&A with Lloyd to ask him about how he, as CFO, was able to navigate one of the most difficult challenges in decades. I also delved into Booz Allen’s broader approach to talent management, which informed Booz Allen’s decision to retain all staff during the COVID-19 crisis. Finally, I asked Lloyd about his own experiences and outlook as an African-American CFO at a time when businesses, including his own, are confronting and being called to act upon ongoing racial inequity.
Jeff Thomson: Amid COVID-19, business continuity was top of mind for CFOs who were tasked with hard decisions like staffing cuts. As many companies laid off staff for cost containment, Booz Allen, in contrast, guaranteed employment and continuing benefits for all 27,000 of its employees through July 1. What cost containment measures did you put in place to ensure business continuity? What role did you play in the decision to keep all staff employed? How did you restructure financial resources to make this happen?
Lloyd W. Howell, Jr.: We sensed in late January that what was then an overseas pandemic could ultimately impact our business, and from those early weeks we established three priorities that drove every decision: First, we would protect the health of our people, their families and our communities; second, we would continue to support the critical missions of our clients, and third, we would work to ensure the financial and institutional resilience of our firm.
In March, we saw that our employees, who directly deliver our revenue and were now mostly teleworking, were fearful about the pandemic’s impact on their jobs and families. We leveraged our business’ strength to remove that worry quickly and guarantee full job security through at least July 1. We are a values-driven firm, and that approach to initially support our people was core to what we stand for.
We ran multiple models to assess the potential COVID-19 adverse impacts to our firm. My finance organization worked with experts in our health care practice to estimate how much sick leave or elder and childcare leave people might end up needing, how much our client work could be impacted, and how our communities could be hit.
Those models indicated that $100 million, referred to as our Employee Resiliency Fund, could cover it, and other financial modeling helped us determine where we could repurpose existing funds without impacting our overall financial performance. Given our exceptionally strong balance sheet built over the years, we had the flexibility to take care of our people. Separately, we worked with our People Services organization to determine where to apply those funds.
We found the money in some obvious ways, and some tougher ones. We knew no one was going to be traveling to or sponsoring conferences and we could discontinue large celebrations like holiday parties and off sites this year. Beyond that, senior executives sacrificed some compensation, and we held off promotions, raises and hiring in parts of the business.
As a result, beyond preserving jobs (and we’ve still not laid anyone off due to COVID), we funded emergency time off, more dependent care, greater funding of our Employee Resilience Fund and grants to our local communities. With reduced job worries, our employees have been more productive than ever, our financial performance has been exceptional and we still have some of the $100 million available if there are new COVID-related impacts later this year.
Thomson: Like many other companies, Booz Allen had to rapidly transition much of its staff to working from home amid the pandemic. As working from home becomes the new normal, is the company rethinking investments in facilities and telework technologies, staff management and customer service? How are you contributing to these conversations as CFO?
Howell: We were in a relatively strong position from a technology standpoint when the move to telework began. During the week of March 9, we determined that majority telework was necessary; we did a test run with maximum telework among our 27,000-plus employees that Friday and when we saw the network and our collaboration tools holding up so well, we announced the move to maximum telework on Sunday. We went from about 20% telework to well over 80% almost overnight, and eventually to over 90%. For those employees whose jobs required them to be in our office or on a client site, we focused on developing extensive safety protocols.
We discovered that people were actually more productive at home, and taking less time off, which has resulted in strong business performance in our past two quarterly earnings reports. However, it is clear this level of work is not sustainable. We know that the stress of childcare, schools, parent care and other issues are wearying, and we’ve placed a great focus on providing resources, mental health support and other assistance. We have also been very proactive in encouraging people to take time off to refresh themselves; even a week off helps people return to work in a better mental place. While some employees begin to return to the office, most will work from home for some time, and we continue to look at and assess the challenges of working from home in this environment from a financial and people management focus.
My organization is looking at continued investments in technology and other ways to support robust telework, and we initiated projections regarding our future real estate needs but, frankly, it’s too early to consider major decisions. We just don’t know the full course of this virus and what will happen afterwards. We also are listening closely to clients, because they are finding their way, and because their needs will impact our plans.
Thomson: Major upheavals and organizational changes make it more important than ever for companies to have strategies for talent acquisition and retention. What is your approach to talent management as head of Booz Allen’s finance function? When it comes to hiring finance professionals, what skills and types of backgrounds do you look for? How can finance education programs better equip entry-level employees with these skills?
Howell: As an African American executive with an engineering degree, I’ve seen firsthand the impact of diversity on organizational and financial success. In my current CFO role, I’ve never been more convinced that diversity is core to operating as a high functioning organization that will attract and retain talent, particularly in times of crisis. Long before this summer’s national focus on race and social equity – a topic on which my firm has been outspoken – I have focused on developing and recruiting against a broader definition of diversity within my organization.
Beyond the traditional measures of diversity, I find an even greater impact on business performance comes from giving the same level of attention to recruiting and developing staff with diverse skillsets and training them on how to apply their unique professional expertise to higher-level financial problems or business crises within our firm. Within my department, we have staff trained in tax accounting, Sarbanes Oxley regulations, treasury functions, government accounting, compliance and other areas.
But to raise this diversity of training from a slate of staff with functional skills to the level of influential strategic business partner requires development, mentoring and fostering an environment of credentialization. An important part of diversity in a financial organization is supporting and encouraging diversity in credentials and certifications that provides a level of trust and confidence to the larger organization we serve.
We ask our financial staff to look at larger problems with a “CFO mentality,” meaning that every individual decision by staff at every level should be made as if they are sitting in my own chair, looking more broadly at impacts across our company and market. To get there, as an example, we train our professional staff to look beyond the mechanics of cash collections, to understand the end-to-end process and impacts, starting with client issues related to payment timing all the way to the impact on cash deployment and guidance to investors. With that context, their diverse core skillsets have greater influence and inclusion in corporate decision-making.
Thomson: As you just indicated, more business leaders are understanding the tangible benefits diversity delivers. What does Booz Allen do to attract and retain minority talent? What are your personal perspectives on this, as an African American finance professional who has worked with Booz Allen for most of his career and has reached a senior leadership position?
Howell: I spoke about this on Booz Allen’s most recent earnings call, in which we opened our call – before talking about our finances – with a lengthy discussion of our firm’s approach to addressing race and social equity. The past few months have been challenging for our country and our firm. July 18 marked 32 years since the day I joined Booz Allen. This firm is my family, and just like with all families, sometimes difficult conversations are needed. We’re in one of those times. We have one of the most diverse leadership teams in corporate America today, and our Board of Directors is also much more diverse than most. I’m proud of that; it’s an important start.
But it is also clear that we have work to do inside Booz Allen and throughout society. Given my place in this “family,” it was meaningful to me to help craft our six-point equity agenda that includes a full independent review of how all our business practices impact people of color, educational actions and philanthropic investments. To be a force for change in the world, we must start by ensuring that every person at our firm feels empowered, and that those who have been marginalized in the past know they have a voice, a seat at the table and an opportunity to thrive.
When employees and candidates see our commitment and the results of our efforts, it will reinforce their desire to continue to be a part of our work, and the success of the business and our clients.
Thomson: You began your career with Booz Allen as an engineer, before obtaining your MBA and then rose to a senior leadership role in the finance department. How did you bring your skills and background in the technical side of business to bear in being a leader and decision-maker? How does your engineering background inform your approach to finance?
Howell: I began with an interest in engineering, which led me to opportunities and increasingly greater responsibilities at Booz Allen, but I have always felt that no career is linear. Circumstances change, things happen, you learn and develop experience in new areas and these impacts can take you to a place you hadn’t expected. I ended up having decades of experience running parts of Booz Allen’s client-facing business.
I think that has made me particularly effective in my CFO role, in large part because I can communicate and articulate needs as I would have wanted to hear it in my previous roles. I’ve been in the shoes of my internal clients for a long time and appreciate the pressures they are under and the performance they are trying to achieve and how to help them as best I can to achieve that performance.
Among the most effective tactics for my own career success, I think, has been a willingness to admit when I am wrong and relying on mentors and my surrounding colleagues. When people try to “fake it until they make it,” eventually they are found out. I think there’s nothing wrong with admitting when you don’t know something. When you do, more times than not, folks are very open and helpful in response. Beyond that, I’ve always reached out to colleagues, mentors and coaches for advice and counsel. I think the best education and learning process is to learn from others. That was essential as I took over the CFO role. Finance is a language. To be good, I think you need to listen to others, understand and learn the language.
This article has been edited and condensed. Follow me on Twitter. Check out my website.
I’m president and CEO of IMA (Institute of Management Accountants). Prior to joining IMA, I was the CFO for business sales at AT&T. In this column I’ll draw on my experience to offer CFOs – and their teams – insights and ideas related to challenges of the position, in light of market demands and global economic conditions. During my tenure at IMA, I’ve spoken on accounting regulatory issues, providing testimony to U.S. Congress on internal controls and risk management as it relates to Sarbanes-Oxley implementation, appearing before the SEC and PCAOB on critical regulatory matters impacting U.S. global competitiveness, and I served as a member of the COSO (Committee of Sponsoring Organizations) board of directors, which delivers global guidance on internal controls and enterprise risk management. I’ve authored numerous trade articles on accounting issues and recently contributed a chapter on ethical leadership to “Trust Inc.: Strategies for Building Your Company’s Most Valuable Asset,” entitled Trust: The Uncommon Denominator in an Uncommon Business World.
After a period of time where it seemed like cryptocurrencies and all financial products with a bit of risk were being shelved in favor of low-risk products such as holding cash or government bonds (specifically the US dollar and Treasuries), the actions of the Federal Reserve and other central banks have caused a roarback in equity markets — and a corresponding increase in cryptocurrency values.
Since March, 15th, 2020, when the Federal Reserve cuts rates to zero in an unscheduled rate cut, the S&P 500 had its best quarter since 1998 and bitcoin’s price, about to touch $5,000 USD around that time period, is now roaring back above the $10,000 USD mark.
Understanding the relationship between monetary policy and cryptocurrencies can be a bit tricky, but it’s a worthy exercise. As cryptocurrencies start taking on institutional speculation, their short-term price movements gyrate with the markets. Some of this has been plainly stated before and often observed: some institutional investors think of bitcoin as digital gold.
They’ll use bitcoin as a hedge against the inflation they think will result from excessive unconventional monetary policy. This was the explicit view of Paul Tudor Jones, the billionaire investor loading up on bitcoin.
In this reading, the actions of central banks help create demand for cryptocurrencies by creating the conditions (excessive money supply) wherein a certain class of institutional investors feels the need to hedge their wealth.
But structural changes in monetary policy implementation also auger surprising new developments and support for new cryptocurrencies in ways that go beyond the “cryptocurrency as hedge” narrative.
Witness the new trend of DeFi, decentralized finance companies that are largely behind the growth in ethereum demand as ethereum gets locked into new financial products. DeFi represents alternative financial solutions built on ethereum that are looking to augment or replace traditional loans.
Typically, there’s a “search for yield” that happens when there are very few options to yield money in deposits or low-risk products. DeFi, with interest rates that range as high as 100% annualized on stablecoins looks like a more attractive option than fiat banks that can offer flat ~1% at best.
Within that structure, it’s clear that there are nuances, and perhaps warnings — products that yield that high likely are pure arbitrage situations that might fade away at any time and they carry with them risks (such as exploits) that might be underaccounted for. Yet, even if there are a lot of question marks — there’s no doubt that coordinated monetary policy around the world is driving people to look for new companies and technologies such as DeFi — an important secondary consequence.
The amount of unprecedented monetary support has also created a short-term window for institutional investors to be able to enter cryptocurrencies. Grayscale Investments LLC attracted more than $900 million in the second quarter, which was double any amount it had ever raised before. Most of that interest was spurred by institutional investors, who were supported by monetary policy, and placed in a “search for yield” and hedge-seeking situation.
Some of that was due to arbitrage, but there’s no doubt that institutional investors that were battening down the hatches when COVID-19 lockdowns were happening are back as a force across a variety of economic investments — including cryptocurrencies.
Some of this institutional investment comes on the heels of leading figures in the industry looking for shelter during the largest monetary expansion in history. This helps accentuate this short-term trend, with institutional investors suddenly finding the context, the need and the support to start pouring into investment in cryptocurrencies.
Beyond these factors however, is the potential pending development of a digital dollar. This is not being pushed by monetary authorities, but rather heard in the fiscal halls of power in Congress. Yet, research in this area will spur interest in cryptocurrencies by confirming the digital ascendency of finance into retail cash — and creating a contrast and another item that might highlight cryptocurrency’s usefulness as a hedge.
It is, however, the greater retail adoption of bitcoin and cryptocurrencies that is more interesting than the short-term movements associated with institutional investors pushed by monetary policy in one way or another towards cryptocurrencies.
A new study from Cornerstone Advisors says that 15% of Americans now own some cryptocurrency, with about half of those having invested in the first six months of 2020, among unprecedented monetary policy changes and COVID-19. High income, millennials and Gen Xers were some of the groups spurring this growth. Americans who don’t hold cryptocurrencies and had no plans to do so thought their financial health stayed the same (55%) mostly while a plurality of those that currently hold cryptocurrencies thought that their financial health was much better (44%).
Cryptocurrencies are getting short-term boosts in pricing from a wave of institutional and retail investors with a variety of incentives, many of them brought on by the largest monetary expansion of our age. Some of those incentives are here for the long haul, as monetary authorities struggle with the short-term effects of the COVID-19 pandemic and the longer-haul efforts to fully recover economically. Monetary policy during COVID-19 is acting as a bridge to cryptocurrencies for many new institutional and retail investors skeptical of its effects — and perhaps an enduring reason to stay in the cryptocurrency ecosystem.
I was one of the first writers in 2014 to write about the intersection of blockchain in remittance payments and drug policy with VentureBeat and TechCrunch. Since then, I’ve been an early long-term HODLer of Ethereum, and I’ve built several mini-projects with blockchain for fun. I’d like to learn as much as possible about our decentralized future while sharing that knowledge with you
Although mortgage rates have hit historic lows, home prices haven’t exactly plummeted along with them. In other words, buying property remains a sound investment. But it isn’t exactly easy to just jump into.
It takes a lot of capital to buy a home, and few people can justify buying their first property as an investment rather than a place to live. As such, real estate investment has long been reserved for the ultra-wealthy.
So how does this math work? DiversyFund operates a private real estate investment trust (REIT) that is comprised of projects and properties handpicked by a team of expert real estate investors. Those experts identify high-potential properties, buy them, then manage, renovate, and sell them to turn a profit. When they sell, they split the profits among all investors in the trusts, putting money back into your pocket.
DiversyFund is operated by real-estate pros, so they can eliminate the middlemen entirely, and work more quickly to turn a profit. They even reinvest your dividends each month, so you have higher potential earnings. Plus, both the company and the investors make the bulk of earnings when the properties are sold at the end of the 5-year term, meaning their goals are aligned with yours.
With a minimum investment of $500, you can start generating passive income by being a DiversyFund investor. You can be a property owner with none of the responsibility and without having to do the painstaking research and analysis that goes into investing. The barriers are lowered, you just have to take a jump. If you’re ready to start investing, check out DiversyFund today.
Whether you’re a bitcoin trader or new to the market, you can buy, sell, and trade cryptocurrency with AUD, USD, and other major currencies. We service clients globally, including Australia, the United States, Singapore, Canada, New Zealand, and Europe
On Thursday (June 4), crypto investment firm Grayscale Investments, LLC (“Grayscale”) reported that its total assets under management (AUM) had reached $4.0 billion, an increase of 8.1% compared to the size of the AUM a week earlier, and almost double what it was in May 2019.
Grayscale is wholly-owned subsidiary of Digital Currency Group, Inc. (“DCG”), which is an investor in some of the best-known businesses in the crypto space, such as Abra, Coinbase, Coindesk, BitGo, and Ripple.
Grayscale was founded in 2013 by Barry Silbert, who is the current CEO of Grayscale, as well as the founder and CEO of DCG.
Grayscale is the sponsor of nine single-asset investment products — Grayscale Bitcoin Trust, Grayscale Bitcoin Cash Trust, Grayscale Ethereum Trust, Grayscale Ethereum Classic Trust, Grayscale Horizen Trust, Grayscale Litecoin Trust, Grayscale Stellar Lumens Trust, Grayscale XRP Trust, and Grayscale Zcash Trust — and the manager of one diversified investment product (Grayscale Digital Large Cap Fund).
Its two most popular investment products are Grayscale Bitcoin Trust and Grayscale Ethereum Trust.
As Rayhaneh Sharif-Askari, Director of Investor Relations and Business Development at Grayscale, explained in episode #006 of “Coinscrum Markets”, Q1 2020 was a record quarter for Grayscale (and the way things seem to be going, Q2 20202 might be even more impressive).
“From a broader perspective, COVID-19, and the policy implications especially, have really set the stage for Bitcoin to be seen as the store-of-value asset that we had hoped it eventually would be… Institutional investors are taking active long positions in digital assets through our products…
“In Q1, we have raised half a billion dollars across all of our products — $390 million of that was into our Bitcoin Trust… We also saw about $110 million in the Ethereum product…”
Even more interestingly, she pointed out that most of the interest in these investment products is from institutional rather than retail investors:
“Since the inception of our firm, about 90% of the inflows have been from institutional investors… This past quarter, about 88% of the flows came from institutions, and breaking that down further, we looked at the type of institutions…
“Within hedge funds… it’s most traditional hedge funds.”On May 28, Grayscale provided the following AUM update:
Then, a week later (i.e. on June 4), Grayscale pointed out that its total AUM had increased by $200 million to $4 billion (with the Bitcoin product responsible for $3.515 billion):
Now, let’s take a closer look at Grayscale’s most popular investment product — Grayscale Bitcoin Trust (OTCMKTS: GBTC).According to data from Grayscale’s website, as of June 5, there were 378,088,800 shares outstanding and the amount of BTC per share was 0.00096107.
Crypto analyst/researcher Kevin Rooke pointed out on June 4 that since Bitcoin’s third halving on May 11, Grayscale has added 28,413 BTC to the Grayscale Bitcoin Trust.
Since we know that after the halving event on May 11 Bitcoin’s block mining reward was reduced from 1800 BTC per day to 900 BTC per day, this (roughly) means that since that date Grayscale has bought 147.98% of all the Bitcoin produced by the miners!
The reason we say “roughly” in the paragraph above is that we do not know the exact amount of BTC that Grayscale bought in the open market (from OTC brokers, prime brokers, or crypto exchanges) since according to the Grayscale’s FAQ page, “Existing and prospective investors may contribute coins in kind for shares of Grayscale’s single-asset Products.”