Where to Find Yield --Investing for a Good Return --PFN

I have been writing a series about various categories where one can find high yield investments that have a lower risk profile. Today, I am going to take time out from discussing categories of investments to covering one idea in particular. The individual investment for today is Pimco Income Strategy Fund II (Symbol PFN). PFN is one of many bond funds that are traded on the market. It is a closed end fund that invests in all sorts of debt instruments. Many of the bonds that it buys are relatively higher in risk. I rely on Pimco, one of the premier companies in managing debt to avoid too much risk in the fund.

There are some very good reasons to buy PFN at the moment. These include the following:

1) The fund is currently paying a return of 8.5% at its current price of $11.29.

2) PFN is selling at a premium above net asset value of 3.58%; this is a bit on the high side, but not too great for a corporate bond fund.

3) PFN has undistributed income of just over 50 cents per share. The current monthly payment is 8 cents. More than likely, PFN will pay a special dividend either in December or January. This could raise the return from the dividend to more than 12% and it also could lead to a nice rise in the price of the fund. The high undistributed income could also lead to a rise in the monthly payout. Last April, this went from 6.5 cents per month to 8 cents per month. Indeed, both the special dividend and the increased monthly payout could be in the cards for the near term.

In my opinion, PFN is a good place for a high yield investment at this time. The yield is fine without the possible bonus or the increase in the dividend. When you add both of those possibilities on top of the current dividend, the return may be outstanding. One could even buy the fund in the expectation of selling once these higher payouts are announced.

DISCLOSURE: I am long PFN at the moment. I may add more in the near term.