PDI: Dividend Underwater, A Bet On Interest Rates
Summary
- PIMCO Dynamic Income Fund has significant exposure to non-agency MBS and high yield credit, posing risks to its cash flow streams.
- PDI has delivered lower returns compared to the S&P 500, but still offers a high dividend yield of 15%.
- PDI's ability to sustain its high dividend yield is uncertain, and it may need to attract additional leverage or divest positions to maintain it.
- Currently, it is a pure play bet on the medium-term trajectory of Fed Funds rate. If the interest rates do not go down, PDI would be in a serious position to cut its dividend.
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