There are two types of people in this world: those who think a 7%+ yield must be a trap, and those who know where to look. I prefer to be the latter. Because while the market’s still busy fawning over AI stocks with no dividends and sky-high valuations, I’ve quietly been collecting reliable, oversized checks from one of the most underappreciated corners of the market: closed-end funds (CEFs). And today, I’m sharing my favorite one — delivering a juicy 7%+ yield, growing fast, and still flying under the radar of most retail investors.
This isn’t your grandma’s savings account, and it sure as hell isn’t another crypto token promising to revolutionize money while going bankrupt. This is real income, from real assets, managed by real professionals, with a history of kicking the S&P 500 in the teeth — quietly.
So, what is this magical unicorn of yield and growth? Patience, grasshopper. First, let’s walk through why this fund exists, why it matters, and why it’s earned a spot in my income-focused portfolio — possibly yours too.
Why a 7% Yield Matters More Than Ever
Interest rates are high, but not forever. Bonds are boring, T-bills are already starting to lose their luster, and dividend stocks are either overbought or acting like they’ve never heard of inflation. Meanwhile, a well-picked high-yield fund can give you monthly income without you lifting a finger.
But here’s the kicker: most people see a 7%+ yield and immediately scream “dividend trap!” as if those are the only two words in their vocabulary. And to be fair, they’re not always wrong. Sometimes a high yield is masking a weak portfolio or poor management. But not always.
The fund I’m about to share has:
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A long track record
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High-quality underlying assets
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Consistent distribution coverage
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And most importantly… rising NAV (net asset value) over time.
You’re not just collecting coupons while your capital burns. You’re actually growing wealth while pulling income out the front door.
Enter: The PIMCO Dynamic Income Fund (NYSE: PDI)
Yes, I’m talking about PDI — the PIMCO Dynamic Income Fund. Or as I like to call it: “The Income Machine That Wall Street Forgets About Until It’s Too Late.”
PIMCO isn’t some fly-by-night outfit. They’re one of the most respected bond managers in the world, with decades of fixed-income experience. Their job? Extract every possible penny of yield from global credit markets, manage duration, hedge risk, and hand you a check every month.
PDI has a current distribution yield of 7.6%, paid monthly, and has a history of:
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Raising its dividend (yes, really)
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Maintaining NAV even during chaotic market cycles
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Buying low, selling high, like you wish you did
Let’s break this down.
Anatomy of a High-Yield Beast
Holdings Breakdown:
PDI doesn’t just throw darts at junk bonds and pray. This fund is actively managed, combining:
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Mortgage-backed securities (MBS) – PIMCO’s specialty
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High-yield corporate debt
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Emerging market credit
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Bank loans
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Agency and non-agency bonds
This diversified income cocktail is how PIMCO manages risk while still targeting high payouts.
Leverage? Oh yes.
Let’s not pretend this thing doesn’t use leverage — about 40% worth. But PIMCO doesn’t use leverage like a degenerate options trader. They use it strategically, exploiting market inefficiencies and short-term dislocations to lock in yield spreads.
It’s like giving your fund manager a Formula 1 car instead of a Honda Civic. Sure, you could crash. But if you know how to drive it? You win the race.
But What About NAV Decay?
Ah yes, the old CEF criticism: “But the NAV is falling!”
First, let’s acknowledge the obvious. All leveraged bond funds took a hit in 2022 when the Fed decided to wage war on inflation with a flamethrower. But here’s the nuance: PDI’s NAV has already started recovering, and its distribution was recently increased — a strong sign the underlying income is more than enough to cover payouts.
In fact, PDI’s 2024 UNII (Undistributed Net Investment Income) reports show it over-earned its distribution — meaning it’s making more income than it’s paying out.
Let that sink in. A 7.6% yield that’s not only sustainable — it’s backed by excess income.
Most high-yield ETFs and dividend stocks can’t say that with a straight face.
Monthly Income: Why It Matters
I don’t know about you, but I pay bills monthly — not quarterly. So why wait for that Johnson & Johnson dividend every 3 months when you can get paid monthly?
PDI is designed for people who want their investments to feel like a paycheck. Every 30 days, you get another slice of that 7.6% yield, compounded if reinvested or spent if you’re living off your portfolio.
That’s the kind of predictability retirees, early retirees, and income-focused investors crave. And it beats the pants off dividend ETFs that pay like they’re on vacation half the year.
Tax Considerations: Better Than You’d Think
Here’s a fun twist: part of PDI’s distribution is often classified as return of capital (ROC) — but don’t panic. This isn’t destructive ROC (where they’re just giving you back your money like a Ponzi scheme). It’s tax-advantaged ROC, stemming from things like amortization and accounting magic inside the fund.
The upshot? You defer taxes on a portion of your income until you sell. That’s a win if you’re in a taxable account and want to keep your tax bill low while still raking in income.
Risks? Of Course. But Manageable
Let’s be adults — there is no free lunch. Yes, PDI has risks:
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Leverage risk: Interest rates can crush returns if not managed properly
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Credit risk: Defaults can eat into income
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Premium risk: PDI often trades at a premium to NAV, which can contract in bear markets
But the thing is… these are calculated risks. Not roulette wheel risks. And unlike speculative tech stocks, PDI’s team has tools — and a history — of managing through volatility.
When you compare it to stocks that tank 30% on weak guidance and pay no dividend, I’ll take a little premium compression risk and keep collecting my income, thanks.
PDI vs. The Competition
Let’s play the “why not just buy this” game.
Why not just buy SCHD?
Great fund. Low fees. Safe. But you’re getting 3.5% yield tops, and that’s quarterly. Good luck funding early retirement or fighting inflation with that.
Why not TLT or bonds?
Welcome to the world of negative real returns and duration risk. When rates fall, bond funds rise — until they don’t. PDI’s actively managed flexibility gives you far better defense.
Why not another CEF?
Plenty to love in the CEF space. But many are opaque, mismanaged, or too niche. PDI gives you a broad credit strategy with a veteran team and monthly income. It’s the Goldilocks fund for income investors.
Real-Life Example: Show Me the Money
Let’s say you invest $100,000 in PDI today. That gets you roughly $7,600 a year in income — about $630 a month, without selling a single share.
Compare that to:
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SPY: $1.60 per month
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TLT: $2.00 per month
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Cash: Maybe $400 per month… for now, until the Fed cuts
PDI is like putting your money on payroll.
And reinvesting that income? That’s how you turbocharge compounding. Over 10 years, assuming reinvestment and no major catastrophe, PDI could easily outperform lower-yielding "safer" assets — while actually putting money in your pocket along the way.
But Isn’t It Boring?
If you find monthly checks boring, I can’t help you. Maybe go chase meme stocks or whatever Cathie Wood is hyping this week.
But if you’re interested in financial independence, early retirement, or just reliable income without sacrificing growth — boring is beautiful.
Boring is what lets you sleep at night.
Boring is what pays the bills.
Boring is what actually works.
When to Buy
PDI sometimes trades at a premium to NAV (currently around 5-6%). While buying at a discount is ideal, this premium is historically modest and reflects investor confidence.
If you're patient, you can wait for a market pullback to grab shares cheaper. But if you want to start the income machine today, a small premium is more than reasonable for what you’re getting.
Pro tip: Set a limit order near NAV and reinvest dividends until you hit your income goal.
Final Verdict: Income Investor’s Dream
PDI is not a get-rich-quick fund. It’s a get-paid-consistently fund. And in a world full of uncertainty, that’s more valuable than ever.
With:
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A sustainable 7.6% monthly yield
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Top-tier management from PIMCO
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Diversified, actively managed global credit exposure
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Tax-advantaged distributions
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And a track record of surviving volatility...
…it’s my favorite high-yield fund right now. Period.
TL;DR Recap:
Final Words of Snarky Wisdom
If you’re still sitting on cash earning 4% in a savings account thinking you’re winning… newsflash: inflation is 3.3%. You’re barely breaking even.
If you’re riding tech stocks with zero yield and 40x P/E ratios, hoping the “AI revolution” won’t crash again… good luck with that.
Meanwhile, I’ll be over here sipping coffee and collecting checks every month from a fund that actually pays me to own it.
PDI isn’t perfect. But it doesn’t need to be. It just needs to be reliable. And in a market full of noise, hype, and broken promises, reliable might just be the best trade you can make.
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