PCI: The 11% Yield Cash Machine

Seeking AlphaDividend Ideas | Financials PCI: The 11% Yield Cash MachineSep. 12, 2020 9:35 AM ET|| About: PIMCO Dynamic Credit Income Fund (PCI), Includes: MITT, NYMT, PCM, PCN, PDI, PFL, PHK, PKO, PTY, RCS, UTFby: Rida MorwaRida Morwa High Dividend OpportunitiesThe #1 Service for Income Investors and Retirees, 9-10% dividend yield.SummaryIn a previous article we discussed the benefits of investing in CEFs.
PIMCO is one of the best CEF managers and this fund is a fantastic opportunity.
The mortgage market has extremely strong fundamentals and is trading at discounts to par.
When fundamentals are strong and prices are low: BUY!
PCI is the best way to do it, with a monthly-pay 10.8% yield.
Co-produced with Beyond Saving
We recently wrote an article "Juicing Your Retirement Yield With CEFs" where we discussed the power of CEFs to provide your portfolio with a high-level of current income.
One of the CEFs we highlighted in that article was the PIMCO Dynamic Credit Income Fund (PCI), this fund is currently yielding 10.8% and is trading at a small 2% premium to NAV.
Today, we take a deeper dive into PCI and discuss why it is such a great deal at today's prices.
The COVID Crash
Like many investments, PCI was humming along as we entered 2020. Then it fell off the cliff in March, with both its price and NAV dropping.
Data by YCharts
The decline was driven by a decline in prices across several of PCI's major allocations. Mortgages, high-yield credit, bank loans and emerging market debt all suffered.
The market's reaction can basically be boiled down to investors worrying that the impacts of COVID-19 increased the risk of lending money. Money rushed out from assets with exposure to loans, and into US Treasuries and the high-end of investment grade credit, thus earning minimal yields.
This is quite common during times of economic turmoil. It should not surprise anyone that the impacts of COVID-19 is putting economic pressure on... Read more