This 15.6% Dividend Is A Smart ‘Buy The Dip’ Play

There are two things I need to bring to your attention right now, especially if you’re an income investor. One is my outlook for the market, as volatility really hits home.

The other is a 15.6%-yielding(!) fund that just changed its name and ticker—and really grabbed contrarians’ attention in the process.

Let’s start with what’s really going on with this wild market.

The NASDAQ is now down more than 10% from its peak price, and stocks on the whole are down for the year. I don’t expect this to last very long. My take: 2025 is likely to be a year of volatility rather than a year of decline.

Short-Term Dips Against a Long-Term Bull Backdrop

Even so, the volatility we’ve seen so far is relatively new. It was only the middle of last month that stocks started making a clear reversal from their long climb, and the NASDAQ 100 is still up 12.6% annualized over the last three years as I write this, while the S&P 500 is up an annualized 9.6%.

Just a quick look at this chart tells you that buying the dip during this period has been a winning strategy. It also tells us that both indices are setting up for another dip-buying opportunity, where stocks will fall to a point where they become irresistible.

COVID Has Reduced the Odds We’ll See Another 2008

During volatile markets, however, the psychological pressures are tough, with sharp declines and trillions of dollars of wealth seemingly vanishing in a matter of days. This has always been a problem for markets, but I think it’s less of a problem now, for one reason: COVID-19.

This might sound a bit strange, so let me explain. At the start of the pandemic, trillions of dollars disappeared in hours. People were literally prohibited from economic activity, as they were forced to stay in their homes. Oil prices actually went negative.

And yet stocks recovered, both because of monetary policy (the Fed swooped in with emergency rate cuts and massive buys of government bonds—so-called “quantitative easing”) and, after that, technological progress (including changes in infrastructure responding to the pandemic, such as new supply chains; new medical technologies; and, of course, AI).

In other words, investors have already seen the worst and it’s fresh in their minds, so even if we face a recession over the next year or two, stocks are unlikely to collapse like they did in 2020 or 2008.

So, in a sense, this time is different, but not in the way one might think: People are less likely to give in to total fear (or 2020-like despair!) as the business cycle weakens. Which means that while stocks are likely to fall, they’re not likely to collapse.

Buying the Dip

In such a situation, a smart play is to buy the dip slowly, steadily and strategically. Since fear is unpredictable, we can’t wait for the market to bottom and swoop in to buy everything, but we can start buying when there’s a correction, buy a little more as it worsens, and buy even more when it becomes a full-on bear market.

And we can essentially double our “dip-buying discount” by purchasing stocks within a closed-end fund (CEF) trading at an attractive discount to net asset value (NAV, or the value of its underlying portfolio).

That’s where the BlackRock Technology and Private Equity Term Trust (BTX), payer of that outsized (to say the least) 15.6% dividend.

BTX is the fund’s newest ticker, which BlackRock changed from BIGZ last month. It also changed the name from the old monicker: the BlackRock Innovation and Growth Term Trust.

As the name now says, the fund invests part of its portfolio in private equity, which can have bigger returns than public stocks in the long run, while the “term” refers to the fact that the fund will come to maturity in 12 years. (Although there is fine print stating that the fund can convert to a perpetual fund, and I fully expect this to happen, so I don’t pay much attention to the “term” in the name here).

The most important thing here (besides the huge dividend, of course) is the discount, which has been narrowing lately:

Since the melodramatic fear-induced selloff of 2022, BTX’s discount has narrowed as investors realized that a 20%-off sale on the fund’s tech-stock holdings, including Marvell Technology (MRVL) and NVIDIA (NVDA), was a sweet deal. BlackRock, the fund’s management firm, even realized this and started a stock-buyback program in early 2024.

There’s just one problem (or at least there was): BTX (under its former incarnation, BIGZ) lagged other BlackRock tech CEFs. But these days the fund is worth your attention.

From BIGZ to “Bigger X”

The changes to this fund run much deeper than a rebrand. BlackRock also made major revisions to its mandate, letting it invest even more in tech stocks.

Now, at least 80% of its assets will be in public and private tech companies, instead of the previous focus on small- and mid-cap growth stocks. That mandate didn’t work because small-cap stocks have underperformed other types of stocks for years, as you can see in the benchmark index fund for small caps, in blue below, compared to the NASDAQ (in orange) and the S&P 500 (in purple).

This wasn’t always the case, and the reason why small caps underperform more now than they used to is another article unto itself.

In short, this was one of the reasons why I was wary of BTX when it was BIGZ. Ironically, BIGZ wasn’t as “big-focused” as it should have been.

That has changed, along with BTX’s fund managers, with the fund now being run by Tony Kim and Reid Menge. This is great news because Tony and Reid also manage the BlackRock Technology Opportunities Fund (BGSAX), which has run the table on the indices, including the NASDAQ, a particularly tough one to beat.

This kind of outperformance deserves a premium, which BTX will likely get eventually. Until then, the fund remains attractive when it trades at a discount, as it is now.

Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report “Indestructible Income: 5 Bargain Funds with Steady 8.6% Dividends.”

Disclosure: none