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High Yield CEF 4-Year Total Returns

Published Thu, 05 May 2016 13:10:27 -0400 on Seeking Alpha

Reaching for yield almost always ends in disaster.
This doesn't mean you have to be happy with 2% Treasuries or 1% CDs, but it does mean prudence, care, and diligence when it comes to finding higher yielding closed-end funds ((CEFs)), especially funds whose income source is junk bonds.
There are a number of reasons for this, ranging from managers' inability to earn payouts, depletion of NAV due to fees, bad bets, derivatives, systemic events, and other problems, and declining junk bond yields over time.
This doesn't stop many investors' hunt for yield, bringing them to have positions in long-term losers like the Cornerstone Strategic Value Fund (NYSEMKT:CLM), Prospect Capital (Nasdaq: PSEC), Chimera Investment Corporation (NYSE: CIM), and the Credit Suisse High Yield Bond Fund (NYSEMKT:DHY). These aren't all closed-end funds or even entirely comparable in any way but one: they promise a high dividend yield significantly higher than their peer group.
Why to Avoid High Yield CEFs
But the yield isn't enough to offer high returns, and the performance of high yield CEFs makes this clear. I've chosen to compare CLM and DHY with the Cornerstone Total Return Fund (NYSEMKT:CRF), Oxford Lane Capital Corporation (Nasdaq: OXLC), the Pimco High Income Fund (NYSE: PHK), and the Pimco Dynamic Income Fund (NYSE: PDI).
Except for PDI, I've chosen these funds because their yields are intoxicating; OXLC is offering over a 25% yield, while... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
OXFORD LANE CAPITAL 10.58   2.2 4.92 1.60 22.41
CORNERSTONE TOTAL RETURN FUND 15.91   0.0 0.00 3.43 19.95
CORNERSTONE STRATEGIC VALUE FUND 15.92   0.0 0.00 0.00 17.49
PIMCO HIGH INCOME FUND 8.54   0.0 0.00 0.00 11.35
CS HIGH YIELD BOND FUND 2.70   0.0 0.00 0.00 10.30


Older articles featuring Oxford Lane Capital (OXLC):
'It Don't Worry Me!' Describes My High-Yield Strategy
Introducing My New High Yield RIC Portfolio
Is It Time To Rotate Out Of High-Yield, Fixed-Income CEFs? Part 2
Is It Time To Rotate Out Of High-Yield CEFs?
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