Closed-End Funds For High Monthly Yields

Let’s shrug off the recent “dividend desert” and find a huge income stream from select closed-end funds (CEFs) that yield 7% or more. Let’s zero in on three corporate-bond CEFs that pay you an average dividend (paid monthly) of 8.2%. Try getting that from the typical (1.3%-yielding) S&P 500 stock.

With that kind of yield, a $500 thousand investment in these three funds would get us a cool $3,410 in monthly dividend income—a game changer if you’re in (or near) retirement.

Let’s start with the Pioneer High Income Fund (PHT), which yields 8.7% and, yes, pays out monthly. But what’s really impressive is how durable this CEF is. With a 13% annualized return over the last three years, we can see that PHT quickly bounced back from the March 2020 market crash.

That’s in large part thanks to a diversified portfolio of over 300 bonds from firms ranging from Liberty Mutual Insurance to Alliance Data Systems (ADS) and T-Mobile (TMUS)—in other words, large, broad-based companies that have been reliably paying their bills for years. That’s important because PHT gets interest from these companies’ loans. And thanks to the economic rebound, the fund’s income stream is safer than it’s been in years, which is why this big yielder is more than worth your attention now.

pht

The PIMCO Strategic Income Fund (RCS) is worth taking notice of because of who manages it: PIMCO, one of the world’s largest bond investors, with over $2 trillion in assets under management. The firm is so big that the US government asked it to help buy mortgage-backed securities during the 2008 subprime-market meltdown, a moment that was highly profitable for PIMCO’s funds, including RCS.

RCS has been growing investors’ wealth for a generation, but COVID-19 hit it hard, which is why the fund’s market price–based return is still below its long-term trend line. But this weaker market-price performance doesn’t make sense, since the fund has been able to recover the value of its portfolio (or its net asset value in CEF-speak) from the worst days of the crisis and begun to increase its returns again.

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