This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

5 Offbeat Ways to Generate 10% Yields

By Carla Pasternak

Interest rates near zero and record-low U.S. Treasury yields make finding good income investments a bit harder these days.

Don't get me wrong. It's still possible to find attractive yields, but you need to know where to look. Some of my best ideas for my High-Yield Investing and High-Yield International newsletters have come thanks to going off the beaten path and looking at asset classes overlooked by others.

For example, I've locked in nice returns in the past by adding offbeat securities such as bank loan funds, trust preferred shares and master limited partnerships to my portfolios.

And luckily for income investors, I'm still finding plenty of fertile hunting grounds out there. Here are five spots where you can still find double-digit yields.

Business Development Companies

Business development companies, or BDCs, are a dream come true for high-yield investors. Many of these companies such as BlackRock Kelso Capital (BKCC - Get Report) yield double-digits and share prices are soaring.

BDC yields are powered by making loans to small companies and passing along the earned income as distributions. They are similar to venture capital funds, giving retail investors the ability to profit from an area normally reserved for only the biggest investors. With bank credit still tight compared to a few years ago, BDCs are thriving as businesses have fewer options for financing.

Like real estate investment trusts (REITs), BDCs must pay out at least 90% of their net investment income as dividends to avoid paying income taxes. That's why they can carry high yields. If you want to invest, look for business development companies that consistently raise dividends (or at least hold them steady) and can cover their dividend with investment income.

Municipal Bond Funds

When is a 7% yield really 10%? When it comes courtesy of municipal bond fund.

Municipal bonds, or "munis," are bonds issued by state and local governments to fund highways, hospitals and other public projects. What makes munis (and the funds that hold them) attractive is that the interest they pay is exempt from federal income taxes, and sometimes state and local taxes too if the bond is issued by your local government.

You'll be hard-pressed to find a muni bond fund that pays more than 10% as a headline yield. But what you should look at is the fund's taxable equivalent yield, which can exceed 10% for muni funds like Pioneer Municipal High Income (MHI). The taxable equivalent yield is the yield you would need from a taxable investment (like a corporate bond) to match the tax exempt muni yield. (Read my article on "How to Hide from the Dividend Tax Increase.")
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BKCC $9.19 0.00%
FTR $5.41 0.00%
JNK $36.30 0.00%
MHI $12.91 0.00%
T $33.40 0.00%


Chart of I:DJI
DOW 17,050.75 +138.46 0.82%
S&P 500 2,013.43 +15.91 0.80%
NASDAQ 4,810.7880 +19.6360 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs