This 13.4% dividend is the best deal in tech right now

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Smart opponents know that when the markets crash, the most beaten up sectors are often the ones leading the (inevitable) upside.

It is one of the most reliable trends in investing. With their crushed valuations (and dividend yields), these stocks are tempting bait for bargain hunters who like to run against the herd.

The financial crisis of 2008 is a good example of this. Financial stocks, which took a beating as millions of mortgages went bankrupt, rallied after the market’s trough in ’09. So did real estate investment trusts (REITs).

That’s why I’m looking at raw technology stocks and technology-focused closed-end funds (CEFs) to lead the way in 2023. Below we discuss a selection of mine CEF insider service yielding an outsized 13.4% today, so we’re getting most of our returns in cash dividends. This leading income game pays off monthly, at.

I will say right away that these are contrarian moves never simple. It took guts to break into real estate and finance in 2009. And technology still looks fragile, with Meta platforms

FB
(META)
announcement of major layoffs last week and Amazon

AMZN
(AMZN)
reportedly about to do so.

However, the broader economy is holding up, pointing to long-term gains for tech companies, especially those in demanding niches like IT security. That makes the period we’re in now — which NYU marketing professor Scott Galloway has cleverly dubbed the “Patagonian Vest Recession” (after the trendy piece of clothing favored by tech workers) — a smart time to buy.

Falling inflation = rising tech stocks

As the past year has shown, technology stocks are moving against interest rates as many of these companies have to borrow heavily to launch new products.

But inflation is And last but not least are beginning to turn in their favour, rising 7.7% in October, below expectations and well below the peak of 8.6% in May. The decline since then has been clear and consistent. And it lends weight to the idea that the Fed will soon suspend its rapid rate hikes.

It is it’s true that technology stocks have rebounded: they’re up 8% since Fed Chairman Jay Powell’s press conference a few weeks ago, in which he took an overly aggressive tone against the Fed’s own statement about future rate hikes. (We’ve never been a fan of Powell’s messages, which are often contradictory. But the market got sucked in: He quickly sank, which we saw as a buying opportunity.)

That opportunity is not over yet. Which brings us to the CEF I mentioned earlier, the BlackRock Science and Technology Trust II (BSTZ). It’s my recommendation CEF insider service that is trading at a 16.5% discount to its net asset value (NAV, or the value of its portfolio).

That discount exists because BSTZ is the youngest technical CEF out there, having launched in late 2019. With little history behind it, paranoid investors quickly oversold it this year. It also adds up to a pretty sweet “double deal” for us as we get the fund’s discount on top of the deal we get on its overly faded portfolio.

The point is that BSTZ’s does not fit with its interests in strong companies like the semiconductor manufacturer Marvell technology

MRVL
(MRVL)
and provider of security software Synopsis

SNPS
(SNPS).
BSTZ also owns a number of private equity firms that offer value that will be realized when they go through their IPOs.

All of this is for sale, and investors who add BSTZ now and can handle some short-term volatility are likely to see strong gains alongside the 13.4% CEF dividend, which is paid monthly.

Michael Foster is the principal research analyst for Contradictory outlook. For more great income ideas, click here for our latest report »Indestructible Income: 5 bargain funds with stable dividends at 10.2%.

Disclosure: none

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