2 Dangerous Yield Traps That Could Kill Your Retirement

Posted On December 1, 2022 7:07 am
By: Dividend Sensei

If you buy the right ultra-yield blue chip you can retire rich. If you buy an ultra-yield trap you might not retire at all.

Ultra-yield CEFs and royalty trusts are two dangerous kinds of investments that unsuspecting income investors and retirees often buy, and later deeply regret.

CLM is a classic 17% yielding CEF yield trap that basically owns the S&P 500, pays out 2.2% of assets as a monthly “dividend” but is returning your own money.

Investors who took distributions in cash since 1987 are down 97% adjusted for inflation, while management collected $180 million in fees.

SJT is a 15% yielding royalty trust that’s still in a 96% bear market and which has severely underperformed oil aristocrats XOM and CVX for 25 years and likely always will.

SJT will eventually liquidate during an oil crash and anyone underwater when that happens will permanently lose money.

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About author

Dividend Sensei

I'm an Army veteran and former energy dividend writer for The Motley Fool. I'm a proud co-founder of Wide Moat Research, Dividend Kings, and the Intelligent Dividend Investor. My work can be found on Seeking Alpha, Dividend Kings, iREIT, and the Intelligent Dividend Investor. My goal is to help all people learn how to harness the awesome power of dividend growth investing to achieve their financial dreams and enrich their lives. With 24 years of investing experience, I've learned what works and more importantly, what doesn't, when it comes to building long-term wealth and income streams and achieving long-term financial goals.