We all know that stocks can rise on nothing but hype for long periods. But at the end of the day, it all comes back to one thing: profits! If they don’t rise, the stock will tank. It’s just a matter of time.
Consider the case of Peloton Interactive (NASDAQ:).
Pandemic Ends, Peloton Crashes
When the pandemic had everyone exercising indoors, speculators piled into the stock, hoping that soaring earnings would ignite the company’s value.
Peloton’s net income was deep in the red then. Fast-forward to today, and it’s still negative. The stock has, of course, dropped to reflect that.
What I’m getting at here is the idea that a stock can gain on hopes of future earnings, but that only lasts for so long. When investors give up hope, losses are inevitable.
Of course, that isn’t the only way to make money in stocks. Those who invest based on the idea that profits will rise in the future can make a profit. Look no further than Peloton itself: Anyone who bought in 2020 with the expectation that demand for that stock would rise in the coming months made a bundle. Indeed, there were over 400% gains within a year for the most aggressive traders.
Can we play this supply/demand game with high-yielding assets like closed-end funds (CEFs)? Yes. One way to do so is to buy a CEF when its discount to net asset value (NAV, or the value of its underlying portfolio) is wide, and market fears are peaking.
Consider the 27.3% price gain the BlackRock Science and Technology Term Trust (NYSE:) saw as its discount narrowed from 13% in October 2024 to 7.7% now.
Lower Discounts Boosting Profits
The gain in the market price was just part of the story—BSTZ’s NAV also rose. That’s why CEFs tend to be solid long-term investments: We get upside from the appreciation of the portfolio and gains in the market price as investors bid it up, cutting the discount.
I bring all of this up now because I’m expecting demand for CEFs—especially tech-focused CEFs like BSTZ—to rise in the years ahead. The source of that demand may surprise you: younger investors—particularly Generation Z, born between 1997 and 2012.
Now, “young investors” and “dividends” aren’t often mentioned in the same sentence, but that’s changing. Bloomberg recently reported that dividends are increasingly catching young people’s attention. In a September 4, 2025, article, reporters Denitsa Tsekova and Vildana Hajric write:
“Decades of schooling. A lifetime at work. A couple of years to enjoy, if you’re lucky. Then it’s all over. That’s the deal generations of Americans have been sold for more than a century: Work hard and invest cautiously and maybe, just maybe, you’ll get a few good years to breathe. To a rapidly growing crowd of young retail investors, it’s a ripoff.”
As a result, Bloomberg reports, Gen Z is moving away from the riskier investments that dominated the headlines in recent years and turning to more staid payouts that older investors have used to obtain financial independence for over a century: dividends!
“Unlike meme stocks or crypto moonshots, this strategy—what might be referred to as dividends and chill [italics mine]— preaches control and consistency, a monthly drip over flash-in-the-pan riches,” Bloomberg continues. “Not YOLO, just yield.”
There is a key difference between how young and older investors are approaching dividends, however. Right now, according to Bloomberg, Gen Z is focusing on ETFs that “offering eye-popping yields generated by complex derivatives.”
These, of course, come with their own risks. Consider the 66.6%-yielding (not a typo) YieldMax TSLA Option Income Strategy ETF (NYSE:), which has attracted a billion dollars in assets because the fund buys Tesla (NASDAQ:) shares, sells covered calls on them, and passes the income to investors.
The good news? It isn’t losing money. The bad news, though, is it’s returned a paltry 17% in the last three years with dividends reinvested.
High Yield, Low Returns
Nonetheless, an interesting thing is likely to happen as young investors start to collect dividends (even outlandish ones like this): They’re likely to want more. And when they mature a little, they’re likely to pivot to sustainable high yields from funds like BSTZ, whose 12% yield is accompanied by a total return (in orange below) that far exceeds that of TSLY over this same time period.
Diversified BSTZ Outruns Single-Stock-Focused TSLY
Not only does BSTZ boast a double-digit yield and stronger performance than TSLY, but it also trades at that 7.7% discount to NAV, too! (ETFs, for their part, never trade at discounts, as we CEF buyers know well.)
It makes no sense for a high-yield, high-return fund like BSTZ to trade for less than the value of its assets. When Gen Z recognizes this, the savviest of them will likely buy in, boosting the fund’s market price and narrowing its discount. By purchasing BSTZ today, we can set ourselves up to capture the profits from that future demand while we enjoy the fund’s 12% yield.
Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, “7 Great Dividend Growth Stocks for a Secure Retirement.”