In This Issueand newsletters for a while, you know

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October 2021 Vol. 8 Issue 5

In This Issue Global X Nasdaq 100............................ 4

Picking High-Yield Investments ........... 7

Reaves Utility Income Fund ................. 9

Portfolio Update ................................ 12

Current Portfolio ............................... 13

Preferred Stocks Tickers ........................ 15

Some Stock Market Predictions

Managing Editor’s Note: The volatile market of the past month is a reminder that Tim’s strategy allows

you to rest easy knowing you’re collecting steady income from your dividend stocks regardless of what the

market is doing. As last as August it was difficult finding many dividend stocks “on sale” but September delivered

a few. There’s no telling if October will be as volatile September, so keep an eye on your inbox each week for

Tim’s Stock of the Week email with the new best value in dividend stocks.

If you have been reading my articles

and newsletters for a while, you know

that I don't try to predict (guess) the

direction of stock prices.

One purpose of the Dividend Hunter

high-yield strategy is to take much of

the share price prediction process out

of our investment decisions.

Over the long term (years), I expect the

Dividend Hunter to return the average

8% yield plus a small amount from

dividend growth. Reinvesting all or a

portion of your dividend income can significantly boost this average annual total

return number.

In a recent weekly newsletter, the widely followed economist Steve Blumenthal

shared some longer-term stock market predictions from major financial

institutions, which I am including below.

"Vanguard’s 10-year return forecast predicts U.S. stocks will return 2.40% to 4.4%, and U.S. bonds will return 1.40% to 2.40%.”

“GMO’s 7-Year Asset Class Real Return Forecast is more somber. Note that ‘real’ refers to after-inflation returns. Compounding at -8.2% per year for

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October 2021 Vol. 8 Issue 5

seven years means your $100,000 is worth $54,941 in September 2028. Not a good outcome. And you can see returns are negative for all asset classes except for emerging market value stocks.”

In recent years, stock market investors have become used to 20% annual returns.

This level of stock market returns is more than double the long-term historical

average. The predictions shown above are likely the mathematical results of

calculating a reversion to the mean.

If the U.S. stock market returns do post lower returns, in the low single-digit to

negative range, over the next decade, many investors will not hit their savings and

investment goals. If the projections turn out to be accurate, we will be pleased

with the market-beating returns from the Dividend Hunter portfolio.

More importantly, the Dividend Hunter strategy's 8% annual cash returns give you

a much more stable outlook on which to plan your financial future.

On a different note, a few updates on your subscription:

If you have questions for me then use this form. I collect all questions during the

week and answer them in the Weekly Mailbag video that comes out every Friday

-8.2% -8.3%

-2.7% -1.8%

-0.2%

3.2%

-3.7% -4.9%

-1.7%

-3.7%

-1.2%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

U.S.Large

U.S.Small

Int'l.Large

Int'l.Small

EmergingEmergingValue

U.S.Bonds

Int'l.Bonds

Hedged

EmergingDebt

U.SInflationLinkedBonds

U.S. Cash

Seven Year Asset Class Annual Rate of Return Forecast

6.5% Long Term Historical U.S. Equity Return

Source: GMO

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October 2021 Vol. 8 Issue 5

evening. Please don’t include personal information like account numbers and

passwords.

Sign up for mobile text alerts. We’re building services to alert you when monthly

issues come out, account status updates, renewal notices, and more. Click here.

Dividend Hunter Insiders: please note that our next bi-weekly live webinar has

been moved to Wednesday, October 6th. You can use the same link as usual to

join. We’ll get back to our regular schedule of every other Thursday starting on

the 21st. If you’re not an Insider and want to sit in on these sessions, click here.

Recently I was the speaker at a presentation on finding variable dividend rate

payers with retirement writer Dennis Miller. We’ve posted a replay of the video

online. You can watch it here.

If you joined us at the Dividend Hunter recently then be sure to visit our new

member area. You’ll get the five steps you need to take to get the most from your

subscription. Just log on to the website and click the “New Members Start Here”

link under the Dividend Hunter heading.

Next month I’ll share with you how to earn extra income with easy to use,

conservative options trades. And then in December we’ll review what’s happened

in 2020 and importantly, my outlook for 2021. As I mentioned in the beginning,

I’m not a predictions kind of investor, rather my outlook will cover more of what

to watch for in the new year and changes we may have to make to our strategy to

adapt and thrive.

Now start reading this month’s issue, it contains a lot of good stuff.

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October 2021 Vol. 8 Issue 5

It’s hard to believe that 15 months

have passed since I added the Global X

Nasdaq 100 Covered Call ETF (QYLD)

to the Dividend Hunter

recommendations list. Let’s revisit

QYLD and see how it has performed.

The fund uses a covered call strategy

to generate monthly income, paid out

as monthly dividends. The fund

holdings consist of owning stocks to

match the Nasdaq 100 Index. This fund

tracks a tech stock heavy index, as you

can see from the top ten holdings:

The QYLD fund strategy is to sell one-

month index options that expire at the

end of each month. Here are some

features of the options used:

Unlike single stock options that can be exercised at any time, index options cannot be called/exercised early.

Settle in cash, not in delivering the underlying index holdings.

Higher index volatility can lead to larger premiums.

If there are gains from writing calls, they are taxed at 60% long-term capital gains and 40% short-term capital gains.

Since the index options cannot be called early, it only matters where the index finishes for the month.

Before expiration, all market swings that take place throughout the month don’t matter.

Currently, QYLD has assets of $4.5

billion, and the net expense ratio is

0.60%. The current distribution yield is

10.36%. While the fund portfolio is

tech-stock heavy, do not expect

tremendous capital gains. Selling call

options puts a limit on the upside

share appreciation potential for each

month.

Global X Nasdaq 100 Covered Call ETF

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October 2021 Vol. 8 Issue 5

It is apparent from the high dividend

yield that the fund is managed to

maximize the options income, which

leaves little room for share price

appreciation. The good news is that

the dividend yield is very attractive,

with a 12.5% trailing 12-month yield.

Monthly dividends have been paid

since January 2014.

The monthly dividends are variable, so

that they will change each month. For

the past 12 months, the dividend has

ranged from $0.1879 per share up to

$0.2333. The average will be right

around $0.20 per share.

The ex-dividend date is around the

20th of each month, give or take a

couple of days as there seems to be no

fixed pattern; check the Monthly

Dividend Paycheck calendar by logging

into the Investors Alley website for

exact dates. Payment is always on a

Tuesday or Wednesday (mostly

Tuesdays) closest to the end of the

month. Sometimes that day falls into

the next month. Again, check the

Monthly Dividend Paycheck Calendar

or the Global X website here, and click

the orange Distribution Calendar in the

right side menu.

A recommendation you might want to

consider is to reinvest at least half of

the QYLD dividends you earn each

month, which would provide an

attractive 5% income stream and allow

you to reinvest to take advantage of

share price swings and grow the

income over the years. Of course, if

you are in the accumulation phase

with your portfolio, put your QYLD

shares on automatic reinvest and

watch the share count and monthly

dividends grow. And, your financial

situation, investing strategy, and risk

tolerance are unique to you, so be

sure to take those into consideration

as well.

I added QYLD to the Dividend Hunter

with a Stock of the Week email on July

7, 2020. Since that day, through

September 22, 2021, the fund

returned 20.17%—a 16.42%

annualized return.

If you bought QYLD at the first

recommendation and reinvested all

dividends, the total return increases to

21.38%, with an annualized return of

17.39%.

Remember that over the bulk of the

returns, 15.23% out of 20.17% came

from the monthly dividends.

This is what it’s about for Dividend

Hunter members – creating a

consistent stream of income for solid

from investments like QYLD. I’m

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October 2021 Vol. 8 Issue 5

adding more all of the time. We know

have a lifetime membership level in

which for one crazy low payment you

can lock in a lifetime of the Dividend

Hunter and a lifetime of new investing

ideas like QYLD. Click here for details

on if your account qualifies.

Editor’s Personal Position: Long QYLD

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October 2021 Vol. 8 Issue 5

I review dozens of potential Dividend

Hunter investments each month. I

have my own lists from which I get

updates, and each month I also ask my

Dividend Hunter Insiders to

recommend a stock for my review. The

request list typically tops 100 picks.

And on top of that, each day there will

be several to more-than-several

requests for my opinion about a stock

in my inbox. (Hint: I don’t answer

those requests.)

Investors can choose from amongst

hundreds of high-yield investments

from the stock markets. With over a

decade of digging into the range of

high-yield investments, I am familiar

with many of these stocks and funds.

Yet I still get surprised by a new one on

occasion. A couple of recent Dividend

Hunter additions came out of the

Dividend Hunter Insiders deep dive

stock report requests.

There are some broad guidelines I

generally follow that determine how I

compile the Dividend Hunter

recommendations list.

My primary goal is to diversify the

recommended investments as much as

possible. I want to keep the list to

around 30 investments. I also think of

the individual preferred stocks as a

mono-block group, leaving me 20 slots

to fill. Within that 20, I want stocks or

other investments to be as

uncorrelated with each other as

possible.

I want to include investments from all

the main high-yield categories. These

include closed-end funds, equity and

finance REITs, energy infrastructure

companies, BDCs, and preferred

stocks. Recently, ETFs that use covered

call strategies have become a new

category.

I stay flexible. One surprise over the

last eight years is how much the high-

yield world can change and change

quickly. Existing strategies stop

working, and new ideas provide

excellent high-yield opportunities. I am

sure 2020 will end up as a history

lesson that I keep learning from and

teaching until the next financial crisis.

Thoughts on Picking High-Yield Investments

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October 2021 Vol. 8 Issue 5

Now let’s talk about assessing

individual investments.

Every investment, stock, or fund is

different. Each should be researched

to determine how it generates profits

or cash flow. You cannot do computer

screens for high-yield stocks.

With a new investment idea, I usually

start by taking a look at the dividend

history. If the stock or fund shows

dividend payments that have declined

over the years, it goes into the trash

bin. This simple step will weed out

hundreds of potential high-yield

investments.

After an investment passes the “pays

stable dividends” test, I dig deep into

how it operates, makes money,

generates free cash flow; if it’s a

company, I want to learn as much as I

can about the management’s goals

and strategies for paying dividends.

The goal of this comprehensive look at

a company is to ferret out any deal

breakers, that could, under certain

conditions, lead to a dividend cut. Put

another way: I want to see the stability

of dividend payments and dig down to

see the foundation that supports that

stability.

For me, this type of analysis is fun

work. Over the years, I have reviewed

hundreds of stocks. Many have

eventually disappointed investors with

dividend cuts. I try to understand what

led to the reductions. Because I have

done it so often, I can usually get

through an investment review in short

order.

Final note: recently I was the speaker

at a presentation on finding variable

dividend rate payers with retirement

writer Dennis Miller. We’ve posted a

replay of the video online. You can

watch it here.

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October 2021 Vol. 8 Issue 5

Reaves Utility Income Fund (UTG) is

the Dividend Hunter recommended

investment for exposure to the utility

company sector. I added the fund to

the recommendations list in

November 2015. This closed-end fund

has been a steady income producer.

The UTG dividend increased four times

since I added it. In a volatile market,

UTG is an investment that provides

stability, monthly dividends, and an

attractive yield.

Investors have long viewed utility

companies as safe-haven dividend

stocks. These highly regulated

companies provide electric power,

natural gas, and water to homes and

commercial customers. The regulatory

agencies approve the rates a utility

charges its customers. Rates are set so

that the utility can cover the

infrastructure spending to maintain

and upgrade its assets and then earn a

fixed rate of return above the

necessary capital spending. The

locked-in regulated profit margins give

a high level of cash flow predictability.

As a result, utility stocks are favored as

steady and moderate dividend growth

payers. I have not included any utility

companies in The Dividend Hunter

recommendations list because yields

tend to be low compared to those in

the other income-focused sectors. For

example, the Utilities Select Sector

SPDR ETF (XLU) yields about 3.0%, well

below my Dividend Hunter usual

minimum of 6%. But the Reaves Utility

Income Fund (UTG) gives utility sector

exposure and a current 6.7% yield.

The S&P utility sector makes up just

over 3% of the S&P 500 universe.

There are about 80 listed U.S.-based

utility companies. As I noted earlier,

the utility sector is highly regulated by

both the states and the federal

government. Thus, the industry is not

glamorous, with few examples of out-

performance or instances of crashing

and burning. The sector has been

much less volatile than the overall

market, with Yahoo Finance showing

UTG with a beta of 0.66. If you are

unfamiliar, here is the definition of

beta from Investopedia:

…you can think of beta as the tendency

of a security's returns to respond to

swings in the market. A beta of 1

Reaves Utility Income Fund

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October 2021 Vol. 8 Issue 5

indicates that the security's price will

move with the market. A beta of less

than 1 means that the security will be

less volatile than the market. A beta of

greater than 1 indicates that the

security's price will be more volatile

than the market. For example, if a

stock's beta is 1.2, it's theoretically

20% more volatile than the market.

Reaves Asset Management

Reaves, which was formed in 1961 and

has performance results going back to

the 1970s, has about $3.5 billion of

assets under management. Services

include separately managed accounts,

a utilities and energy infrastructure

mutual fund, a utilities-focused ETF,

and a closed-end fund—the Reaves

Utility Income Fund. The company

uses a bottom-up investment

approach built on long-term and

ongoing relationships with utility

management teams and regulators.

When I last interviewed one of the

portfolio managers at Reaves, Jay

Rhame, he noted that the Reaves

Jersey City offices are on the route

from Wall Street to the Newark

International Airport. Utility company

management teams make sure they

include a stop at the Reaves location

when they visit NYC to pitch their

companies to the big Wall Street firms.

With its sole focus on the utility sector,

Reaves has a profound understanding

of the operations and financial results

of the companies in the group. I stay in

touch with the portfolio managers,

and we have phone conversations

several times a year.

The Fund

As of the end of June 2021, UTG held

positions in 42 different stocks (full list

here). About 65% of the portfolio is

traditional electricity, gas, water

utilities, and telecom stocks. The fund

also owns media companies like Time

Warner cable and energy and utility

infrastructure companies as smaller

portfolio percentages.

As is typical for a closed-end fund, UTG

uses moderate leverage to increase its

dividend cash flow. Currently, leverage

is at 17%. In dollar terms, the fund has

an asset capitalization of $1.94 billion,

and the leverage allows it to own

$2.34 billion of assets. Some closed-

end funds trade at significant

discounts or premiums to their net

asset value (NAV), the total fund assets

divided by the number of shares. Over

the last 52 weeks, the average

premium for UGT was 1.52%, and the

current (as of 09/22/21) premium is

1.68%. The premium is not onerous,

but if you see UTG trading at a

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October 2021 Vol. 8 Issue 5

discount, take it as a sign to add some

shares.

Investment Results

UTG launched in February 2004, and

the fund has paid a dividend every

month since—yes, this is a monthly

dividend investment! The dividend has

never been reduced, and has in fact

been increased 13 times in the last 16

years, with the most recent increase,

of 5.56%, in June 2021. Since UTG

joined the Dividend Hunter portfolio,

the dividend rate has grown by 25.6%.

The UTG dividends have always been

100% dividend or realized gains

income without any return-of-capital

(ROC). Paying ROC in dividends is a

tactic some closed-end funds use to

support dividends that really have not

been earned by the portfolio. The

occasional, end-of-year special

dividend payments (six in the fund's

history) show that the portfolio

managers have been very successful

with their efforts to invest in the utility

sector profitably.

The bottom line with UTG is that you

get a conservatively and expertly

managed utility stock-focused fund.

Recommendation: UTG is a

conservative addition to any income

portfolio. Currently, the yield is almost

7%, with low to moderate dividend

growth potential and monthly

dividends. That is an attractive combo

for a typically low-volatility fund

investment.

Editor’s Personal Position: Long UTG

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October 2021 Vol. 8 Issue 5

Year-to-date, the Dividend Hunter

recommendations list has performed

well.

The Stable Dividends category has an

average year-to-date return of 27.3%

and a current average yield of 7.2%.

The only real laggard is AT&T (T),

which has a negative 0.4% total return

for the year.

The Variable Dividend Investments

have returned an average of 26.5%.

These results are skewed by PRT,

which has returned 160% for the year,

and the fact that three of the

investments have been on the list for

less than all of 2021 to date. SLVO

remains the only laggard in the

portfolio, down 13.9%, as of

September 22. The average yield for

the category stands at 10.6%.

The Individual Preferred Stocks have

returned 6.7%. That return is not bad

for shares we own for the safe

dividends. The current average yield

for the group is 7.23%.

On September 7, I added PennyMac

Mortgage Investment Trust Preferred

C (PMT.PC) as a new addition to the

Individual Preferred Stocks list. PMT.PC

is a brand-new preferred stock issue

with a 6.75% coupon, and it trades

close to the $25.00 par value.

Portfolio Update

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October 2021 Vol. 8 Issue 5

Current Portfolio

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October 2021 Vol. 8 Issue 5

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October 2021 Vol. 8 Issue 5

Our journey into individual preferred stock shares has produced a lot of questions about

actually buying these shares. Unlike regular stock shares, each broker uses its own

format for preferred shares.

Below is a listing of how different brokers will show preferred shares. You can also use

the symbol lookup function. Enter the regular stock symbol, such as NRZ, and you will

get a list of related securities. Pick the one that looks like preferred shares. You will get

the full name after you select the symbol.

To help you out, here the format for NRZ preferred A on the different brokerage

websites:

TD Ameritrade: NRZ-A

E-Trade: NRZ.PR.A

Fidelity: NRZ/PA or NRZPRA (yes, they use both)

Firstrade: NRZ.PR.A

Interactive Brokers: NRZ PRA

Merrill Lynch: NRZPRA

Schwab: NRZ/PRA

ThinkorSwim: NRZpA

TradeStation: NRZ.PA

T.Rowe Price: NRZ.PRA

Vanguard: NRZ PRA

Wells Fargo: NRZ.A

Note: These formats may not be hard and fast.

I have heard from subscribers that Fidelity treats different preferred stocks differently.

With some, you have to call in and place a trade over the phone—at least a first trade

for the shares. Subscribers have told me this is the case for NRZ/PA. There are other

preferreds that you can buy using the regular online trading system. I purchased some

preferred stock shares this way.

Preferred Stock Dividends with Your Broker Preferred Stock Dividends with Your Broker

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October 2021 Vol. 8 Issue 5

Portfolio prices are determined by the last “Ask” price at the closing of the market on the day before publication; most recent update 09/29/21. Notes: We make no

guarantee that any company in the portfolio will continue dividend payments. For a more detailed look at the portfolio, log on at www.investorsalley.com.

© 2021 Investors Alley Corp. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from

Investors Alley Corp., 41 Madison Ave | Floor 31 | New York NY 10010 or www.investorsalley.com. The information in this email and corresponding websites are

neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its affiliates may hold a position in

any of the companies mentioned. Investors Alley Corp. is neither a registered investment adviser nor a broker-dealer and does not provide customized or

personalized recommendations. Past performance is not necessarily indicative of future results. No trading strategy is risk free. Trading and investing involve

substantial risk, and you may lose the entire amount of your principal investment or more. You should trade or invest only “risk capital” – money you can afford to

lose. Trading and investing is not appropriate for everyone. We urge you to conduct your own research and due diligence and obtain professional advice from your

personal financial adviser or investment broker before making any investment decision.

You should trade or invest only “risk capital” – money you can afford to lose. Trading and investing is not appropriate for everyone. We urge you to conduct your own

research and due diligence and obtain professional advice from your personal financial adviser or investment broker before making any investment decision.

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