Dave's Dividends Payers

[leftovers]

Obviously High rate dividends are a higher risk than the norm of 2-4%.RCS been around for a long time. My practice these days on any high paying dividend is to use a tight stop or to buy way out of the money cheap longer term Put option contracts. RCS has no options so a trailing stop would be recommended if one was to plunk down over 10K into the fund. If you look at a 20 year chart the range is between 8-12 so now would be a safe time to take a position IMHO.

1. Pimco Strategic Income Fund Inc. (NYSE:RCS) Had you opened a position in RCS with only $10,000 just over eight years ago – in January of 2009 – and reinvested along the way, you’d now be sitting on $21,964.64, and an annualized return of more than 10.3%. That’s even through the financial crisis and “slowcovery” that drove more than a handful of other funds into the ground.

First, RCS is up 12% over the last year, and is trading at a 20.11% premium to net asset value (NAV), according to Morningstar. That premium would turn off most investors at first glance. But consider the fact that the NAV is trending downward after peaking in August of last year (at 33.89%), and you’ll see our buying opportunity. In and of itself, this makes RCS attractive simply because it has traded at a 19.54% premium to NAV for the past four years on average.
Second, RCS is very stable. Its beta is only 0.47, meaning that it’s roughly 53% less volatile than the broader markets, which carry a beta of 1.0.

Much of that stability comes from the fact that RCS maintains a leverage-adjusted average maturity of 2.74 years versus typical bond funds that reflect an average maturity of 5-7 years. That makes the fund less volatile than comparable income alternatives when rates rise.
Third, RCS offers a mouth-watering yield of approximately 10.26% at the moment. Over time this really adds up and can significantly boost your returns.

If there is a drawback, it’s that RCS has roughly 80% of its holdings in mortgage-backed assets, so there is some “repayment” risk.
If you’ve never heard the term before, that means that borrowers can repay their obligations earlier than the stated maturity, so fund managers owning those underlying instruments with repayment risk may have to scramble to replace the cash flow

Repayment risk is a much bigger deal when rates are falling, because falling rates make it hard to replace cash flow, because they may not be able to redeploy the capital at high enough rates to match the existing cash flow requirements.

Rising rates are a different story, because higher rates generally offer increased cash flow. Either way, portfolio managers Daniel Ivascyn and Daniel Hyman appear to have things under control.

RCS has never missed a single monthly payment, even during the depths of the 2008-2009 financial crisis, and doesn’t look likely to do so in the near future