JNK - HYI: This High-Yielding Junk Bond Fund Could Be A Decent Holding

2024-03-25 05:40:23 ET

Summary

• Western Asset High Yield Defined Opportunity Fund is a closed-end fund scheduled to be liquidated in 18 months.
• The fund's current yield of 9.52% compares well to similar options in the market.
• HYI's performance has been disappointing, but investors purchasing it today should realize some gains upon liquidation unless interest rates do not fall at all.
• The fund's distribution appears reasonably safe, especially when considering the liquidation event.
• The current entry price looks decent as the fund is trading at a larger-than-average discount on net asset value.

The Western Asset High Yield Defined Opportunity Fund ( HYI ) is a closed-end fund that income-focused investors can employ in order to achieve their goals. At least, investors will be able to employ this fund temporarily to achieve their goals as it is currently scheduled to be liquidated in about eighteen months, on September 30, 2025. The fact that this fund is scheduled to be liquidated at that time need not be a bad thing for investors however, as the current price is below the liquidation price. With that said though, this does not necessarily guarantee that investors will realize a gain from the liquidation eighteen months from now since a lot can happen to the price of the fund's assets between now and that date. It is something that should be kept in mind though, and the fund's current 9.52% yield may only be able to provide investors with income for a limited period of time.

The fund's current yield is reasonably attractive compared to its peers. Morningstar classifies the Western Asset High Yield Defined Opportunity Fund as a "Taxable High-Yield Fund," so here is how the fund's current yield compares to other funds that share this classification:

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