Today I purchased 2000 shares of closed-end fund Corporate High Yield Fund (NYSE:COY) at $7.59. COY currently pays a monthly dividend of $0.059/share, equivalent to 8.9% annually.
I believe interest rate hikes are about to end -- my guess is another two rate hikes to 5.25%. The economy seems to be steadily improving, which should benefit closed-end bond funds that invest in low investment grade corporate bonds.
My target sell price is $7.80 in 1-3 months. If COY meets my target the return will be 3.5%-5%, not terribly exciting, but I believe it's very achievable and safe. If COY drops below $7.50, I will likely pick up additional shares.
I wrote this in a post about COY on December 19th 2005:
I’ve been watching COY, Corporate High Yield Fund, Inc. for over a year now and waiting for it to drop below $8. COY operates as a diversified, closed-end management investment company. COY currently pays a monthly dividend of $0.062, equivalent to 9.8% annually. The company was founded in 1993 and the stock price has rarely traded below $8. COY is currently trading less than $7.50. I expect the stock to drop a bit more before rebounding. I might pick up some shares of COY if the stock drops below $7.40. I expect the shares to rebound within 1-3 months and pass $8 again.
COY closed at my earlier target price of $8 on February 22nd, 2006.