Price stability and dividends are touted as major selling points for non-traded REITs. Historically, non-traded REITS have paid dividends in the 6 percent to 7 percent range.

Closed-end Funds

Closed-end funds (CEFs) are actively managed funds that are listed on securities exchanges and have a fixed number of shares that trade throughout the day in the open market––usually at a discount or premium to a fund’s underlying NAV. Several factors can cause a CEF’s market price to diverge from its NAV, and CEFs often trade at sizable discounts. Depending when a closed-end fund is bought and sold, the premium/discount situation can be either friend or foe for investors.

Roughly 600 CEFs trade in the U.S., and they tend to have specialized portfolios and to focus on an investment objective such as income or capital appreciation.

Yield Shares last year rolled out the YieldShares High Income ETF (YYY), which tracks the ISE High Income Index comprised of 30 CEFs chosen for their combination of yield, discount to net asset value and liquidity. Christian Magoon said the fund’s current yield is north of 8 percent.

Closed-end funds attempt to generate yield by employing leverage and covered call writing strategies—both of which can increase volatility and risk.

BDCs

Business development companies, or BDCs, invest in or lend to small- to midsize companies and provide managerial assistance in hopes of profiting as these businesses grow. They look and act like private-equity firms, but most are publicly traded entities listed on the major stock exchanges. In a sense, they bring the private equity experience to retail investors.

As with REITS, BDCs are treated as regulated investment companies under the Investment Company Act of 1940, which grants them favorable tax treatment in return for distributing at least 90 percent of their taxable earnings to shareholders. And that can mean hefty dividend payouts to investors.

One publicly traded offering from Leonard Tannenbaum’s company, Fifth Street Management, is Fifth Street Finance Corp. (FSC), a BDC that currently sports a dividend of 10.40 percent. Distributions are paid monthly.