Dividends4Life: This Stock Portfolio Gets Investors A 5% Yield Tax Free

Municipal bonds are popular with retirees because they provide tax-free income. Some pay secure yields above 6%, which translates to 10% tax-equivalent payouts to folks in high tax brackets. But buying individual municipal bonds isn’t easy. Many brokers don’t offer them, and the ones that do usually try to sell low quality munis that big institutions have avoided because they know the bonds are poor quality – like the dogs issued by Puerto Rico or Detroit. But most munis are perfectly secure. Ideally, you want to get your hands on the municipal bonds that institutions are buying. Many people think that’s impossible, but it isn’t—it just means we need to think laterally.

But which funds should you buy? Let’s start with the BlackRock Municipal Income Fund (BFK), which pays a 5.8% dividend yield and has a total return of 44.3% over the last three years. Next is the Nuveen Municipal High Income Opportunity Fund (NMZ), which pays a 6.4% dividend—one of the highest in the municipal bond fund universe. Third is the PIMCO Municipal Income Fund (PMF), which pays a 6% dividend and its primary assets come from New Jersey and New York. Finally, we have the PowerShares Insured National Muni Bond (PZA).

Source: InvestorPlace

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