If you are an income-focused investor, you have a lot of opportunities to chose from (as we recently wrote about here). But if you are focused on the “big yield” space, you have a lot to choose from too, and PIMCO is the perennial leader in this space when it comes to bond-focused Closed-End Funds (or CEFs). Here is a look at recent current yields, and distribution coverage ratios, followed by a discussion (and ranking) of these 11 big-yield opportunities (including popular tickers like PDI, PDO, PTY, PAXS, PTY and more). Enjoy!
The Data:
For starters, here is a look at the most current data (especially with regards to distribution coverage ratios, which PIMCO typically post monthly.
Just know, the distribution coverage ratio indicates how much of a fund's distribution is covered by its net investment income. A ratio above 100% means the fund is earning enough income to cover its distributions, while a ratio below 100% suggests it may be using other sources (like return of capital) to meet its distribution obligations, which could be less sustainable over time.
And before we get into the details (rankings) of the opportunities in the table, just know there are more considerations that go into selecting a big-yield closed-end fund, such as the questions in the following graphic.
So with that background in mind, let’s get into the discussion and ranking of these popular PIMCO funds according to yield and especially with close consideration for distribution coverage ratios.
Step 1: Average Distribution Coverage Ratio
For each fund, we compute the average coverage ratio across the previous four months.
PCM (PCM Fund Inc.)
(69.80% + 64.19% + 102.79% + 105.63%) / 4 = 85.60%PTY (PIMCO Corporate & Income Opportunity Fund)
(106.65% + 126.66% + 116.48% + 99.93%) / 4 = 112.43%PCN (PIMCO Corporate & Income Strategy Fund)
(107.67% + 127.73% + 127.53% + 113.21%) / 4 = 119.04%PDI (PIMCO Dynamic Income Fund)
(100.66% + 109.02% + 96.26% + 78.13%) / 4 = 96.02%PHK (PIMCO High Income Fund)
(106.80% + 125.02% + 116.19% + 103.08%) / 4 = 112.77%PFL (PIMCO Income Strategy Fund)
(100.32% + 116.44% + 109.18% + 95.18%) / 4 = 105.28%PFN (PIMCO Income Strategy Fund II)
(116.35% + 135.69% + 123.32% + 112.16%) / 4 = 121.88%RCS (PIMCO Strategic Income Fund, Inc.)
(127.03% + 122.49% + 110.34% + 94.88%) / 4 = 113.69%PGP (PIMCO Global StocksPLUS & Income Fund)
(121.85% + 126.22% + 121.95% + 94.72%) / 4 = 116.19%PDO (PIMCO Dynamic Income Opportunities Fund)
(125.25% + 169.93% + 154.05% + 124.28%) / 4 = 143.38%PAXS (PIMCO Access Income Fund)
(136.76% + 163.09% + 121.90% + 90.99%) / 4 = 128.19%
Step 2: Rank by Average Distribution Coverage Ratio
Now, we’ll rank the funds from highest to lowest average coverage ratio:
PDO (PIMCO Dynamic Income Opportunities Fund): 143.38%
PAXS (PIMCO Access Income Fund): 128.19%
PFN (PIMCO Income Strategy Fund II): 121.88%
PCN (PIMCO Corporate & Income Strategy Fund): 119.04%
PGP (PIMCO Global StocksPLUS & Income Fund): 116.19%
RCS (PIMCO Strategic Income Fund, Inc.): 113.69%
PHK (PIMCO High Income Fund): 112.77%
PTY (PIMCO Corporate & Income Opportunity Fund): 112.43%
PFL (PIMCO Income Strategy Fund): 105.28%
PDI (PIMCO Dynamic Income Fund): 96.02%
PCM (PCM Fund Inc.): 85.60%
Step 3: Consider Current Yield as a Secondary Factor
While the coverage ratio is the primary metric for sustainability, the current yield can help differentiate funds with similar coverage ratios. Let's consider the current yields for reference:
PCM: 11.62%
PTY: 10.16%
PCN: 10.01%
PDI: 13.64%
PHK: 11.61%
PFL: 11.55%
PFN: 11.53%
RCS: 10.05%
PGP: 10.27%
PDO: 11.68%
PAXS: 12.24%
And among the top-ranked funds:
PDO (1st, 143.38%) has a current yield of 11.68%.
PAXS (2nd, 128.19%) has a higher current yield of 12.24%.
PFN (3rd, 121.88%) has a current yield of 11.53%.
PCN (4th, 119.04%) has a current yield of 10.01%.
Also PAXS stands out with a high coverage ratio and the highest current yield among the top funds. PDO, while having the highest coverage ratio, has a slightly lower yield than PAXS. PFN and PCN have solid coverage but lower yields.
And at the lower end:
PDI (10th, 96.02%) has the highest current yield overall at 13.64%, but its coverage ratio is below 100% on average, indicating potential sustainability concerns.
PCM (11th, 85.60%) has a low coverage ratio and a moderate yield of 11.62%, making it the least attractive.
Final Ranking (Best to Worst)
Considering both the average distribution coverage ratio (primary) and current yield (secondary), here's the final ranking:
PDO (PIMCO Dynamic Income Opportunities Fund): Highest average coverage ratio (143.38%) and a solid yield (11.68%).
PAXS (PIMCO Access Income Fund): Second-highest coverage (128.19%) and the highest yield among top funds (12.24%).
PFN (PIMCO Income Strategy Fund II): Strong coverage (121.88%) and a decent yield (11.53%).
PCN (PIMCO Corporate & Income Strategy Fund): Good coverage (119.04%), but a lower yield (10.01%).
PGP (PIMCO Global StocksPLUS & Income Fund): Solid coverage (116.19%) and a moderate yield (10.27%).
RCS (PIMCO Strategic Income Fund, Inc.): Good coverage (113.69%), but a lower yield (10.05%).
PHK (PIMCO High Income Fund): Decent coverage (112.77%) and a good yield (11.61%).
PTY (PIMCO Corporate & Income Opportunity Fund): Similar coverage to PHK (112.43%), but a lower yield (10.16%).
PFL (PIMCO Income Strategy Fund): Moderate coverage (105.28%) and a good yield (11.55%).
PDI (PIMCO Dynamic Income Fund): Below-100% coverage (96.02%), but the highest yield (13.64%)—potentially attractive for yield seekers willing to accept risk.
PCM (PCM Fund Inc.): Lowest coverage (85.60%) and a moderate yield (11.62%), making it the least attractive.
Bottom Line
In addition to this lates ranking (above), there are additional items investors should consider before investing (such as those listed in our earlier (“7 Questions” graphic), as we have previously written about here and here. All things considered, we still like PDO and PAXS the best, and they remain our top 2 PIMCO bond fund holdings in our Blue Harbinger “High Income NOW” portfolio, as you can see here.