How To Grab Tax-Free 5% Dividends From Elon Musk’s Latest Twitter Episode

(TSLA) A recent tweet from founder Elon Musk boosted the stock by asking if they should sell their 10% stake.

(The tweet (a poll among Twitter users) received a positive response, by the way. Musk said he would follow suit.)

I know – another weird tweet with a mask doesn’t seem to make much sense to our earnings investors. But that didn’t happen. Believe it or not, it tells us one thing. Buying municipal bonds – an asset class that many investors consider “sleepy”. That is not true. Starting with hefty tax-free dividends, there’s a reason Munis is loved by millionaires.

And what Musk’s tweet is telling us (even though Musk himself isn’t aware of it) is that if we bought Musk today, it would be a closed fund (CEF), as described below. ) should invest shortly before the entry of new investors. And we have returns in our pockets that can cost us more than 8%!

City Bonds: Maska’s New BFF?

Let’s start with why Musk published this poll. He was responding to a recent conversation in DC about taxing the unrealized gains made by stock market millionaires. In particular, future taxes limit the strategies they regularly use to keep their stock unsold and borrow to finance their lifestyle, in order to avoid the capital gains tax they have to pay on the sale.

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But if there are unrealized benefits, taxable millionaires tend to sell more stock and, most importantly, find tax-friendly alternatives. Here comes the munis.

Munihak on income from tax exemption

Many investors yawn when they hear about Munis, an index fund for comparable asset classes. iShares National Munibond ETF (MUB), the return is only 1.9%. Also, MUB’s long-term returns chart is quite flat compared to the S&P500.

But when we dig deeper, Munis becomes much more interesting. Note that the 1.9% MUB source of income is 100% tax-free for eligible investors (and most eligible Americans). In other words, to get the equivalent of 1.9% of cash flow in dividend stocks (or real estate or junk investment trusts), you need to earn a 3.2% return at the highest tax rate.

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Of course we investors at CEF know what we can do. This is better than the MUB by passing the ETF option and accepting the CEF as a municipal bond.

CEF municipal bonds with a yield of 4.9% “converted” to 8.1%

This brings me to the fund we are highlighting today, the PIMCO Municipal Income Fund II (PML), which offers a 4.9% tax exemption. If you are in the highest tax rate, that equates to 8.1% of taxable income.

In addition, PML has slightly outperformed MUB over the past decade, achieving a solid total revenue of 8.9% per year. In other words, that’s what we do. CEF Insider members want it: We achieve strong and stable price increases while being able to pay dividends. (Also note that the default risk here is small. Less than 0.001% of local government bond defaults.)

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Muni-Bond CEF offers a “heads win, tails win” arrangement.

Even if unrealized income taxes are levied or millionaires are collected, funds inevitably move into the municipal bond market and prices rise.

And even if this tax system is not implemented, the fear of tax increases for the rich will not go away. The millionaire tax has been a hot topic for more than a decade. And throughout the show, investors find value in the most efficient municipal pension funds like PML because of their low volatility and tax-free source of income.