Entering text into the input field will update the search result below

HYI: Fully Covered 7.55% Yield


  • HYI currently offers investors a 7.55% yield that is fully covered by NII.
  • This is also the case when forward projecting the new higher rate based off of the most recent Semi-Annual Report.
  • The fund has recently started to trade at a bit of a stretched valuation based on its historical norm, but last weeks volatility changed that.
  • Looking for a portfolio of ideas like this one? Members of CEF/ETF Income Laboratory get exclusive access to our model portfolio. Get started today »

Co-produced by Stanford Chemist

Western Asset High Yield Defined Opportunity Fund Inc. (NYSE:HYI) is held in our Income Generator portfolio. In addition to this, we previously held the position in our Tactical Income-100 portfolio as well. This was before our recent trade alert that saw the TI portfolio picking up shares of Western Asset High Income Opportunity Fund (HIO) and Western Asset High Income Fund II (HIX). These are both funds offered by the same sponsor and operate in the high-yield space. HYI has recently published an updated Semi-Annual Report that we can take a look at. What we see is that the distribution is still fully covered on an NII basis. This is positive as the fund has recently had a string of raising its distribution. In fact, even when considering the projected distribution totals, the fund is still at over 100% coverage.

The caveat here is that HYI has recently moved to a higher valuation relative to its historical range. The fund currently trades at a discount of 6.32%. This would normally be positive for a fund of having a discount. However, its averages are steeper than this. Its 1-year average sits at quite a wide 7.26%. The 3-year is at 9.03% and 5-year sits at a 9.49% discount. With that being said, HYI is a term dated fund that is expected to be liquidated on September 30, 2025. This means that the fund should theoretically close that gap the closer we become to liquidation date. That is because the fund will be liquidated at NAV and that's what shareholders will receive. Of course, HYI's NAV could trade in a downward trend, and this is why we see a discount primarily in the first place.

I was actually surprised at the quick turnaround in the discount too as

Data by YCharts

Data by YCharts

Data by YCharts

Profitable CEF and ETF income and arbitrage ideas

https://static.seekingalpha.com/uploads/2019/5/2/27546953-15567808556447084.pngAt the CEF/ETF Income Laboratory, we manage ~8%-yielding closed-end fund (CEF) and exchange-traded fund (ETF) portfolios to make income investing easy for you. Check out what our members have to say about our service.

To see all that our exclusive membership has to offer, sign up for a free trial by clicking on the button below!

This article was written by

Nick Ackerman profile picture
CEF/ETF income and arbitrage strategies, 8%+ portfolio yields
Nick Ackerman is an avid student of the markets and has been investing in his own accounts for over 14 years. He is a former Financial Advisor and has previously qualified for holding Series 7 and Series 66 licenses. These licenses also specifically qualified him for the role of Registered Investment Adviser (RIA), i.e., he was registered as a fiduciary and could manage assets for a fee and give advice. Since then he has continued with his passion for investing through writing for Seeking Alpha, providing his knowledge, opinions, and insights of the investing world. His specific focus is on closed-end funds as an attractive way to achieve income as well as general financial planning strategies towards achieving one’s long term financial goals.


I provide my work regularly to CEF/ETF Income Laboratory with articles that have an exclusivity period, this is noted in such articles. CEF/ETF Income Laboratory is a Marketplace Service provided by Stanford Chemist, right here on Seeking Alpha.

Analyst’s Disclosure: I am/we are long HYI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article was originally published to members of the CEF/ETF Income Laboratory on February 3rd, 2020. It has been edited to account for last week's market volatility.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.