- BKT has been on the radar of many income investors due to its ultra high-quality allocation and a very attractive distribution rate of 6.85%.
- We take a look at how this fund is able to generate an income yield that is an order of magnitude higher than that of AAA-rated securities.
- The structure of agency MBS as well as tilts to higher-coupon securities, interest-only strips and duration hedges allow the fund to generate a high income level.
- The fund's portfolio yield-to-worst, however, is closer to 1.0-1.3% after fees, which reflects the yields of agency indices and sector ETFs.
- Investors who are after a high income stream at the lowest volatility and who care less about total return or true portfolio yield may find BKT attractive.
For further details see:
BKT: Dissecting This High-Yield, High-Quality CEF