XLU - PDI: 14% Dividend Is Not Enough
2024-04-12 13:00:22 ET
Summary
- PIMCO Dynamic Income Fund currently has a dividend yield close to 14%, which is very attractive for income investors.
- However, the PDI closed-end fund's yield is not enough to: A) make it competitive in terms of total returns; or B) compensate for the risk exposure of its underlying holdings.
- When comparing PDI's total return to other benchmarks over a reasonably long period, it significantly underperforms.
- PDI's large exposure to mortgage-backed securities poses a significant risk, especially in the current conditions with high rates and narrow yield spread.
Thesis
The PIMCO Dynamic Income Fund ( PDI ) is currently paying a dividend yield of 13.6%. So, you must be wondering what my title meant by saying it is not enough. First, let me start by clarifying what I did not intend to mean. I did not intend to argue that 13.6% is a low yield. It is truly mouthwatering and offers a substantial income for income investors....
PDI: 14% Dividend Is Not Enough