The Last Cheap Dividend Stocks Yield Up to 9.7%

Brett Owens, Chief Investment Strategist
Updated: July 11, 2025

The last bargains on the big board? Discounted closed-end funds (CEFs).

CEFs are often the “last stop” for dividend deals. We are talking about an inefficient corner of the income universe, which is just great for us contrarians—we love the discounts.

And these funds can trade for less than “fair value” for months and even years on end. When the markets washed out in April, these CEFs were discarded by their vanilla dividend owners. Let’s pick up the pieces for up to 12% off, or 88 cents on the dollar. And in the process secure yields up to 9.7%.

Nuveen Dow 30 Dynamic Overwrite Fund (DIAX)
Distribution Rate: 8.4%

We’ll start with the Nuveen Dow 30 Dynamic Overwrite Fund (DIAX), an example of a strategy that thrives in CEF land: covered calls.

DIAX’s five fund managers attempt to replicate the performance of the Dow Jones Industrial Average, but with less volatility, by owning the DJIA’s components while also selling call options on between 35% and 75% of the notional value of the equity portfolio.

Covered-call funds generally offer the exact same tradeoff: Receive lower volatility and a higher percentage of returns coming from distributions in exchange for lesser overall performance than the underlying index (because DIAX’s holdings are being “called away” as they rise). Unfortunately, in the case of DIAX, the underperformance is stark, even when considering a distribution rate that’s more than 5x the Dow’s dividend yield.

We’re generally better off buying funds like DIAX when we think the Dow is toppy. The fund trades at an 11% discount as I write, more than its recent average of 9%.

Neuberger Berman Next Generation Connectivity Fund (NBXG)
Distribution Rate: 8.3%

Numerous CEFs turn income-unfriendly segments of the market into distribution funnels. Take the Neuberger Berman Next Generation Connectivity Fund (NBXG), which generates an 8%-plus monthly payout from a few dozen technology, communications, and consumer stocks.

While thematic ETFs are a dime a dozen, thematic CEFs like NBXG are few and far between. This Neuberger fund’s theme is next-generation connectivity; managers Hari Ramanan, Yan Taw Boon, and Timothy Creedom seek out stocks that “demonstrate significant growth potential from the development, advancement, use or sale of products, processes or services related to the fifth generation mobile network and future generations of mobile network connectivity and technology.”

But if we take a quick look, it’s pretty apparent NBXG can also stand in as a play on artificial intelligence (AI). Mag 7 holdings such as Meta Platforms (META), Amazon (AMZN), Alphabet (GOOGL) and Nvidia (NVDA) are pretty direct plays on AI at this point. The fund even invests in private companies, such as AI-powered Grammarly. It also engages in options trading to generate gains from options premiums and tamp down on risk.

Neuberger’s CEF has trailed the tech sector since inception, though that’s not a terribly fair comparison given its exposure to other sectors. Still, this strategy has shown a lot of promise over the past 18 months or so:

The fund’s discount to NAV is generous, at 11.2% currently, so we have NBXG’s assets selling for 89 cents on the dollar..)

Royce Micro-Cap Trust (RMT)
Distribution Rate: 7.5%

Another place we might not expect a high-single-digit yield? Small-cap stocks.  But that’s exactly what we get from Royce Micro-Cap Trust (RMT).

RMT—managed by Jim Stoeffel and Andrew Palen—is a micro-cap value fund in name, though given an average market cap of about $750 million, it’s truly closer to small-cap in nature. Still, not exactly a who’s who of ballyhooed dividend names. Holdings include the likes of electronic component maker Bel Fuse (BELFA), which pays a fractional yield, and online advertising firm Magnite (MGNI), which pays no dividend whatsoever.

So, what’s with the big distribution? RMT doesn’t really trade options, nor does it use debt leverage. Instead, it’s just a quarterly distribution of predominantly long-term capital gains.

Not ideal, but RMT pulls it off.

I’ve previously pointed out that RMT always trades at a discount, and indeed, it’s trading right around its five-year average discount to NAV (12%). That’s not exactly a good thing—ideally, management should have a plan to close that discount at some point. But it’s hard to knock Royce too much given RMT’s consistent outperformance.

Virtus Total Return Fund (ZTR)
Distribution Rate: 9.7%

Virtus Total Return Fund (ZTR) is a “portfolio in a can,” capable of investing in stocks and a wide array of bonds and other fixed income, both domestically and internationally.

ZTR’s four-manager team has currently built a 75/25 stock/bond portfolio. The equity sleeve is both lopsided and defensive in nature; half of its weight is in utilities, while the rest is largely taken up by industrials and energy firms. On the debt side, ZTR owns investment-grade and junk corporates, emerging-market bonds, asset-backed securities, mortgage-backed securities, bank loans, Treasuries, and more.

Like many closed-end funds (but unlike the CEFs above), ZTR amplifies its bets through debt; it currently has 130% of assets invested thanks to debt leverage.

Virtus Total Return is considered a “moderate allocation” fund, which refers to funds that typically have between 50% and 70% of their assets invested in stocks (with the rest in bonds and/or cash). While this CEF currently has a 75/25 blend, I’ve seen it as low as 60/40 when looking at it in the past. Still, for comparison’s sake, it’s worth looking at ZTR against a couple different allocation benchmarks—in this case, a 60/40 ETF and a more aggressive 80/20 ETF.

Virtus’ fund has enjoyed pockets of outperformance in the past, but the fund has lost an enormous amount of ground recently. Its dips have been harsher than the plain-vanilla ETFs, which is normal for a leveraged CEF, but its recoveries have been more muted—the opposite of what we’d expect.

Unfortunately, that blunts the appeal of ZTR’s nearly 10% distribution (paid monthly), as well as a roughly 11% discount to NAV that’s cheaper than its five-year average (8%).

Calamos Global Dynamic Income Fund (CHW)
Distribution Rate: 8.4%

Calamos Global Dynamic Income Fund (CHW) is a global fund that can invest not just in common stock, but investment-grade corporates, junk corporates, preferred stock, bank loans, convertible debt, asset-backed securities, US government securities, options, and more. At the moment, about two-thirds of assets are invested in common stock, with another 15% in convertibles, 10% in corporate debt, and the rest scattered around the other categories.

Geographically speaking, the US accounts for a little more than half of the fund’s assets, with the rest in developed markets like Germany, Japan, and Canada, as well as emerging markets like China and India.

On top of all of that, CHW’s five-manager team also utilizes a hefty amount of debt leverage: just south of 30% currently.

There aren’t many global allocation funds out there, and those that are simply aren’t built the way CHW is—especially given that management has a long leash and a lot of assets they can explore. But comparisons against the SPDR SSGA Global Allocation ETF (GAL)—an ETF in the same category (global moderate allocation)—are favorable, albeit bumpier.

CHW is also trading at a tasty 10.7% discount to NAV that’s more than twice as deep as its five-year average, and it’s doling out an 8%+ distribution, paid monthly.

A Fully Paid Retirement for Just $500,000?

Calamos’ CEF is on the volatile side, but it sets a great example for the two income baselines we’re looking for in retirement:

1. Yields around the 8% mark. With that level of income, we can retire on dividends alone.
2. Income that’s paid monthly. Our bills come every month. We want our retirement income to be paid out every bit as frequently.

These are the core principles behind my 8% Monthly Payer Portfolio: A group of generous stocks and funds that pay us enough to live on dividends alone—without ever needing to sell a single share to generate cash.

The math on this portfolio is easy to follow:

• A $500,000 nest egg could earn $40,000—depending on where you live, that could be enough for a fully paid retirement on its own.
• You could generate a $48,000 annual dividend “salary” from a $600,000 nest egg.
• And if you have managed to stow away a cool million bucks to work with, the 8% Monthly Payer Portfolio could pay you an equally cool $80,000 in dividend income every year.

Better still? You’d be cashing dividend checks not annually, not quarterly, but each and every month.

No “lumpy” payouts. No complex dividend calendars. No dumping money into certain stocks because you’re getting underpaid every third month.

Just paydays as smooth as when you were collecting a paycheck!

0R

If we double the value of the control share VWRP 272K. The gamble with your future is, it could be a lot less or more.

Using the 4% rule it could provide a ‘pension’ of £10,880.00

The Snowball should produce an income of £18,000.00, which you should be able to pencil in with some certainty because with a dividend re-investment plan you fail by the month not the year.

Better, much better if you have longer before you intend to spend your hard earned income.

When you start to spend your dividends, most of the dividends in your Snowball should increase near to the inflation rate.

The comparison share is VWRP, where the 4% rule will be used to provide a pension.

Current value of VWRP £136,278.00, not too shabby.

Current pension you could withdraw £5,451.12.

Current Snowball pension £9,120.00

Do you wish to invest in the dog or the tail or maybe both ?

Here’s how I use a SIPP so my daughter can retire at 51 with £8m

The SIPP’s an excellent tool for investors who want to take hold of their retirement planning. Dr James Fox explains why his daughter has one.

Published 27 June

SMT

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

As a parent, I want to give my daughter every possible advantage for her future. That’s why I decided to open a Junior Self-Invested Personal Pension (SIPP) for her now. That’s despite her retirement being five decades away.

The reason’s simple. The earlier you start investing, the more powerful the effect of compound interest becomes. And the more likely she is to achieve true financial security in later life.

A Junior SIPP allows me to contribute up to £2,880 a year. And with government tax relief, it becomes £3,600 — a 20% boost before the money’s even invested. By starting with her current balance of £3,500 and contributing £3,600 a year, or £300 a month, she’ll benefit from both these tax advantages and the long-term growth potential of the stock market.

Looking at the numbers

Let’s look at the numbers. Assuming an average annual return of 10% — a figure that reflects long-term stock market averages and is achievable with a diversified investment approach —her pension pot could reach over £8m in 50 years (she’d be 51). This projection includes modest annual increases in contributions. I’ve added this due to the likelihood that she’ll be able to pay in more once she starts working herself.

The power of compounding means that the money invested in her early years works hardest, growing exponentially over decades. For example, after 10 years, her pot could already exceed £80,000, and by year 25, it could be over half a million. By year 50, with continued contributions and growth, the total could surpass £8m, providing her with a level of financial independence that few can imagine.

However, starting a SIPP for my daughter is about more than just numbers. It’s about giving her a head start, teaching her the value of long-term investing, and ensuring she has choices and security in the future. In a world where retirement provision is increasingly an individual responsibility, I believe this is one of the best gifts I can give her.

A stock for the job

Scottish Mortgage Investment Trust (LSE:SMT) is a core holding in my daughter’s SIPP. It’s an investment trust with a long-term focus on high-growth, innovative companies across technology, healthcare, and other transformative sectors.

Despite recent volatility, the trust’s strategy of backing world-changing businesses has delivered outsized returns over time. Its managers have a proven track record of identifying winners, and the trust’s diversified approach helps spread risk across dozens of companies. Currently, the portfolio’s top holdings include SpaceX, MercardoLibre and Amazon.

One risk to highlight is Scottish Mortgage’s use of gearing (borrowings to invest). This amplifies both gains and losses, making the trust more volatile than traditional funds. This, combined with its concentration in fast-growing but sometimes unproven businesses, means short-term swings are inevitable.

However, for patient investors with a long-time horizon, Scottish Mortgage is certainly worthy of consideration. It’s diversified while broadly focusing on technology-driven investments, and I believe it will continue to drive strong growth in her SIPP.

How long would it take an owner of Legal & General shares to get their money back in passive income?
Our writer looks at the passive income potential of Legal & General, one of the highest-yielding shares on the FTSE 100 (INDEXFTSE:UKX).

Posted by James Beard

Published 11 July

LGEN

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Passive income — earning money from doing very little — is a great way of saving. And buying dividend shares is one of the most popular ways of building a nest egg for later in life, or to help set aside cash for a rainy day.

But it can sometimes be bewildering deciding which stocks to buy. Personally, I like to invest in the largest listed companies. Their strong reputations and global reach means they can be highly profitable. As a result, they tend to pay the biggest dividends. And generally speaking, their earnings are more reliable, making their payouts more predictable.

An example
One of the best passive income shares around at the moment is Legal & General (LSE:LGEN), the pensions, life insurance and asset management group.

For 2024, it declared a dividend of 21.36p. Based on its current (11 July) share price of 252p, it means the stock’s yielding 8.5%. This makes it the second-highest-yielding share on the FTSE 100, where the average is 3.5%. It also comfortably beats anything that could be earned on a high-interest savings account.

And if it was able to maintain its payout at this level, anyone buying one of the group’s shares today would get their money back in just under 12 years.

But if the income was reinvested buying more of the company’s shares, the payback period would fall further.

Caution!
However, for two reasons, this type of analysis is a little simplistic. Firstly, dividends are never guaranteed. Should Legal & General’s earnings come under pressure then one of the first things likely to be cut will be payments to shareholders.

However, the group has a better record than most when it comes to maintaining its dividend. It was last cut during the 2008-2009 financial crisis and it kept it unchanged during one year of the pandemic. The company’s pledged to increase its payout by 2% per annum from 2025-2027.

The second reason why these numbers must be be treated with caution is that the group’s share price could fall. Of course, it could also go up.

But there’s little point receiving generous dividends if the underlying value of the shares is being constantly eroded. Unfortunately, nobody can see into the future. However, over the past five years, Legal & General’s been a steady performer. Its shares are now changing hands for 14% more than they were in July 2020.

Strong prospects
Personally, I think the company’s well placed to benefit from an ageing population and the likelihood of the state retirement age continuing to rise.

But its investments are sensitive to wider macroeconomic conditions. And a sustained downturn in global equities or the bond markets will impact its earnings. It also faces intense competition from some household names as well as some challenger brands.

However, it has a strong pipeline of potential new business. It’s also been around since 1836. Over the past 179 years, it’s come through plenty of difficult times, including financial crises and wars.

In addition, it has a strong balance sheet holding more than twice the level of reserves needed to comply with regulatory requirements. But it’s the group’s generous dividend — supplemented by a share buyback programme — that sets itself apart from most of its peers. Overall, I think it’s one of the best FTSE 100 stocks to consider.

The journey to date.

The portfolio was started on the 09/09/22 with seed capital of 100k, no further capital will be added

Included are dealing costs for buys £10.00 and sales £5.00.

Because of the costs buys are normally above 1k but any profit taking may be lower as it’s the markets money not the Snowball’s.

Remember even if you book a profit, a profit is not a profit until the share is sold and the money sits in your account.

At the end of 2022 the Snowball earned dividends of £1,609.01

2023 £9,422.59

2024 £10,796.00

2025 £6,893.20 to date

But it takes time to build.

The current plan.

2025 target income of £9,120.

Current cash to re-invest £576.46

Current shares xd £327.00

GL

Investors could target £8,840 of annual dividend income from 5,851 shares in this FTSE 250 high-yield star !

Shares in this FTSE 250 stock generate a much higher dividend yield than the index average and can produce potentially life-changing passive income over time.

Posted by Simon Watkins

Published 10 July

ABDN

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

FTSE 250 global investment manager aberdeen (LSE: ABDN) is up 53% from its 9 April 12-month traded low of £1.23.

Much of this jump has come from a turnaround in results as it continues with its reorganisation plan. This was instigated after the firm was demoted from the FTSE 100 in August 2023. It broadly aims to reduce middle management levels, cut costs, and improve the customer experience.

A risk to the stock is that this plan falters at some stage. Another is that a renewed surge in the cost of living prompts customers to cancel their policies.

However, 2024 saw an IFRS profit of £251m, compared to a £6m loss the previous year. Its 30 April Q1 trading update saw a reiteration of 2026 targets of a £300m+ operating profit and around £300m of net capital generation.

A further bump in its share price followed June’s upgrading of the stock to Overweight from Neutral by investment bank JP Morgan. The new rating indicates that the bank expects the stock to outperform its sector.

How much dividend income can be made now?

A stock’s yield moves in the opposite direction to its price, if the annual dividend stays the same. As a result, such a price rise has reduced the firm’s dividend yield from well over 10% when I first purchased it.

Nevertheless, it is still delivering an annual payout of 7.8%. By comparison, the current average yield of the FTSE 250 is 3.4% and the FTSE 100 is 3.5%.

Consensus analysts’ forecasts are that aberdeen will keep its dividend at 14.6p until the end of 2027 at minimum. It has been at this level every year since 2020.

Given the same average share price as now, this would continue the 7.8% dividend yield offered by the stock.

At that price, £11,000 — the average UK savings amount – would purchase any interested investor 5,851 shares in aberdeen.

Those shares would make £858 in dividends this year. Over 10 years on the same basis this would rise to £8,580 and over 30 years to £25,740.

That said, if the dividends were reinvested back into the stock – ‘dividend compounding’ – much more would be made.

More specifically, given the same 7.8% average yield, the dividends would be £12,936 after 10 years, not £8,580. And after 30 years they would be £102,332 rather than £25,740.

Including the original £11,000 stake, the total value of the aberdeen holding would be £113,332 by then. And this would be paying an annual dividend income of £8,840 at that point.

Will I buy more of the shares?

I have periodically been adding to my holding in aberdeen since I bought it after its demotion from the top-tier index. Aside from its huge dividend income potential, I thought it was enormously undervalued back then.

Both elements behind my investment decision were proven correct then, and I think both still stand now.

The yield forecast is for 7.8% until 2027 at minimum. And a discounted cash flow valuation shows the stock is 47% undervalued at its present price of £1.88. Therefore, its ‘fair value’ is £3.55.

Consequently, I will buy more shares very soon.