The next fund to be discussed in our series featuring good exchange-traded fund (ETF) investments for income and dividend seekers is PowerShares CEF Income Composite Portfolio (PCEF), a “fund of funds” that holds other exchange-traded funds (ETFs) in a carefully balanced arrangement.
The funds in which PCEF invests include those focused on taxable investment-grade fixed-income securities, high-yield fixed income and option-writing funds, among others. These funds are combined into PCEF, which serves as an income-generating machine. It also is a diversified fund due to its wide array of holdings. Regular bond funds are the greatest portion of the PCEF pie, with high-yield bonds and option-based income taking up about 30% each.
This fund did not perform well during 2015, as its share price fell 9.79%. However, it also has paid out about 9% in dividends during that time, so its net loss was minimized due to its income stream. If the fund can stabilize and have a better year in 2016, that 9% dividend yield will start to look very attractive indeed. It also currently is trading at a greater discount to net asset value than its annual average indicates. The expense ratio for this fund is currently at 1.88% due to acquired fund fees. And its assets under management total $616 million.
This ETF diversifies its holdings among quite a few funds, with no one holding comprising more than 4% of assets. Some of its largest holdings are PIMCO Dynamic Credit Income Fund (PCI), 3.77%; Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG), 2.72%; DoubleLine Income Solutions Fund (DSL), 2.41%; Eaton Vance Limited Duration Income Fund (EVV), 2.28%; and BlackRock Enhanced Equity Dividend Trust (BTZ), 2.24%.
If this “fund of funds” sounds like a well-rounded investment to you, PowerShares CEF Income Composite Portfolio (PCEF) might improve its performance this year.
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