{"id":10248,"date":"2022-07-15T20:25:30","date_gmt":"2022-07-16T01:25:30","guid":{"rendered":"http:\/\/blog.jlbn.net\/?p=10248"},"modified":"2022-07-15T20:25:32","modified_gmt":"2022-07-16T01:25:32","slug":"the-savvy-investors-plan-for-8-9-dividends-from-oversold-tech","status":"publish","type":"post","link":"http:\/\/blog.jlbn.net\/?p=10248","title":{"rendered":"The Savvy Investor\u2019s Plan For 8.9% Dividends From Oversold Tech"},"content":{"rendered":"\n<p>After a 30% drop this year, tech is the&nbsp;<em>last<\/em>&nbsp;sector most folks want to invest in\u2014which makes it a superb hunting ground for us contrarian dividend investors.<\/p>\n\n\n\n<p>Even so, we need to be careful in this Fed-spooked environment, where near-term volatility is certain, so we\u2019re going to hedge our tech investments by focusing on a type of\u00a0<a rel=\"noreferrer noopener\" href=\"https:\/\/contrarianoutlook.com\/how-to-invest-in-cefs-for-8-dividends-20-upside\/\" target=\"_blank\">closed-end fund (CEF)<\/a>\u00a0that gives us the following:<\/p>\n\n\n\n<ul><li><strong>An outsized 8%+ dividend\u00a0<\/strong>that can see us through rough markets without having to sell shares, and \u2026<\/li><li><strong>The ability to\u00a0<em>actually profit<\/em>\u00a0when markets get rough.<\/strong><\/li><\/ul>\n\n\n\n<p>We get both of these rare strengths in the\u00a0<strong>Nuveen Nasdaq 100 Dynamic Overwrite Fund (QQQ\u00a0<a rel=\"noreferrer noopener\" href=\"https:\/\/www.forbes.com\/investment-funds\/qqq\/\" target=\"_blank\">QQQ<\/a>X),<\/strong>\u00a0a CEF whose vitals we\u2019ll delve into in a bit.<\/p>\n\n\n\n<p>Let\u2019s talk a little more about tech first\u2014specifically its performance over the long haul. Because while caution is warranted in the short run, there are many reasons to be bullish in the long term, including history.<\/p>\n\n\n\n<p>I expect that trend to continue, making a buy now, especially through a high-dividend \u201chedged\u201d fund like QQQX, a smart move.<\/p>\n\n\n\n<p>Consider also that, with a 30% decline from its all-time high, the NASDAQ<a rel=\"noreferrer noopener\" href=\"https:\/\/www.forbes.com\/companies\/nasdaq\" target=\"_blank\">NDAQNDAQ<\/a>\u00a0100 has now fallen even further from its all-time high than it did at the bleakest point of the COVID-19 pandemic, long before vaccines, effective medicines or even any idea of when lockdowns would end.<\/p>\n\n\n\n<p>That\u2019s absurd, considering that we\u2019re all using products and services from&nbsp;<strong>Apple&nbsp;<a href=\"https:\/\/www.forbes.com\/companies\/apple\" rel=\"noreferrer noopener\" target=\"_blank\">AAPL<\/a>(AAPL), Amazon&nbsp;<a href=\"https:\/\/www.forbes.com\/companies\/amazon\" rel=\"noreferrer noopener\" target=\"_blank\">AMZN<\/a>&nbsp;(AMZN), Google&nbsp;<a href=\"https:\/\/www.forbes.com\/companies\/google\" rel=\"noreferrer noopener\" target=\"_blank\">GOOG<\/a>&nbsp;(GOOG)&nbsp;<\/strong>and<strong>&nbsp;Microsoft&nbsp;<a href=\"https:\/\/www.forbes.com\/companies\/microsoft\" rel=\"noreferrer noopener\" target=\"_blank\">MSFT<\/a>(MSFT)&nbsp;<\/strong>more than ever. Obviously, the Federal Reserve is a big part of the story here, but it isn\u2019t the whole story. Because in recent days, we\u2019ve seen tech starting to stabilize, which makes sense when you look at the fundamentals.<\/p>\n\n\n\n<p><strong>The Best Companies at the Lowest Prices<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"http:\/\/blog.jlbn.net\/wp-content\/uploads\/2022\/07\/Tech_earnings_compared_to_PE_Ratios.jpg\"><img loading=\"lazy\" width=\"600\" height=\"297\" src=\"http:\/\/blog.jlbn.net\/wp-content\/uploads\/2022\/07\/Tech_earnings_compared_to_PE_Ratios.jpg\" alt=\"\" class=\"wp-image-10249\" srcset=\"http:\/\/blog.jlbn.net\/wp-content\/uploads\/2022\/07\/Tech_earnings_compared_to_PE_Ratios.jpg 600w, http:\/\/blog.jlbn.net\/wp-content\/uploads\/2022\/07\/Tech_earnings_compared_to_PE_Ratios-300x149.jpg 300w\" sizes=\"(max-width: 600px) 100vw, 600px\" \/><\/a><\/figure>\n\n\n\n<p>Investors appear to be slowly realizing that the NASDAQ is too cheap, with a P\/E ratio of 22.3 (second chart above), despite the fact that earnings per share are growing at a 13% rate. Likewise, the NASDAQ 100\u2019s P\/E ratio is closer to that of the S&amp;P 500 (which is around 19.3) than it has been in years, even though NASDAQ companies are posting faster earnings growth than the S&amp;P\u2019s more humble 4.1% growth rate.<\/p>\n\n\n\n<p>So while everyone is getting in a stir over the Fed and inflation, which are serious issues in the short term, they are throwing the baby out with the bathwater and selling very good companies that are cornerstones of the modern economy.<\/p>\n\n\n\n<p><strong>How to Profit From Short-Term Tech Volatility\u2014and Get Set for Long-Term Gains<\/strong><\/p>\n\n\n\n<p>Now let\u2019s swing back to QQQX, because it can give you the large cap tech companies in the NASDAQ at a nice \u201cselloff discount\u201d of around 30%, along with a bit of downside protection and a hefty 8.9% income stream.<\/p>\n\n\n\n<p>A good portion of that income stream, along with that decrease in volatility, comes from the fact that QQQX sells call options on its holdings, and the fund holds the entirety of the NASDAQ 100. Those options give QQQX an income stream that it passes on to investors\u2014and that income stream is directly tied to volatility, because the more volatile the market, the more willing traders are to pay up for those options.<\/p>\n\n\n\n<p>Here\u2019s how it works: QQQX\u2019s management sells call options, which are basically contracts under which the fund sells the right to buy its stocks to another investor at a fixed share price in exchange for a cash payment, known as a premium. This gives the seller protection from a downturn, since they get to keep the premium no matter what happens, and the option expires if the stock falls below the set price.<\/p>\n\n\n\n<p>If the stock rises above that price, it gets sold, or \u201ccalled away.\u201d That can cap the fund\u2019s upside, as it will inevitably sell strong performers, but the fund does get to keep the premium.<\/p>\n\n\n\n<p>This strategy makes now a good time to take a close look at QQQX as a way to play short-term volatility in the market, then, over the long run, switch over to a \u201cpure\u201d tech CEF as the sector bottoms and (inevitably) begins another upswing.<\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>After a 30% drop this year, tech is the&nbsp;last&nbsp;sector most folks want to invest in\u2014which makes it a superb hunting<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[254,3421,3422],"tags":[888,3571,3425],"_links":{"self":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10248"}],"collection":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10248"}],"version-history":[{"count":1,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10248\/revisions"}],"predecessor-version":[{"id":10250,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10248\/revisions\/10250"}],"wp:attachment":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10248"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10248"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10248"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}