Remember Bill Gross? The financial media still quotes him here and there. Otherwise, he’s kicking around on X, tweeting a bit, looking (and flailing) to stay relevant.
A far cry from his previous life! Bill Gross was the man who built PIMCO into the biggest bond shop on planet Earth. He’s kind of a quirky guy—hung out near the beach in Southern California, practiced yoga in his office. A little prickly to work with, but definitely a great mind in the fixed-income space. He built PIMCO by himself, and he got all the best bond deals.
But as the years went by and the company grew, Bill started to weigh on the people he worked with. (He was a lot, by many reports—Mary Childs’ The Bond King documents just how much.) Such a handful that, eventually, in 2014, PIMCO ousted the king. He was gone. He was shown the door at the firm he created himself.
PIMCO could send Bill off to an early retirement because they had his successor waiting in the wings. Dan “the Beast” Ivascyn is not as flashy as Bill, but he’s equally good—maybe even better. The Beast has run PIMCO quietly ever since. He’s the best bond investor most people have never heard of. (And he’s reported to be low maintenance!)
The beauty of the Beast is that we don’t need millions to put him to work. For the price of literally a single share—less than 20 bucks!—we can “hire” Ivascyn! And he’ll send us a double-digit dividend paycheck every single month. (How’s that for a deal? He works for us—and pays us!)
These are retirement makers we’re talking about. A $100,000 position dishes $11,750 to $15,800 per year.
Let’s start with the biggest of the dividend beasts: PIMCO Dynamic Income Fund (PDI), which dishes a fantastic 15.8% per year in dividends. On a $100,000 stake, that’s the $15,800 I mentioned at 22 cents a share.
PDI raised its payout in its early, formative years, locked it in around 22 cents a month and has never cut it. So, for over a decade that included the COVID crash and 2022 bond bloodbath, this dividend was rock solid. Which is exactly what we income investors want. The steady, unrelenting payout. And even better when it appears monthly!
Now, is the 15.8% risk-free? Not quite—but it doesn’t require outsized heroics from the Beast. Here’s where PDI stands from an income standpoint.
Net investment income (NII) covers about 90% of the payout over the last fiscal year, or 90 cents on the dollar. In the latest single month, though, it slipped to 71%, so we’ll keep an eye on it. It also carries a growing return-of-capital slice: 29% in the latest month versus 9% over the prior year—the fund handing back some of your own principal. It hasn’t overdone it lately. And here’s the catch: it’s worth it—even at 90% coverage, that’s not bad.
PDI levers up some to pump its payout, borrowing about 32% of its portfolio. When the Fed is cutting rates, this is a tailwind to income because PDI’s lending costs become cheaper. High oil prices have derailed this party for a bit, but I expect oil to come back down eventually. At which point the Fed will resume cutting (because AI is deflationary!) and PDI’s margins will happily grow.
The fund invests in mortgage bonds, high-yield debt, and emerging-market debt. It comes with lots of volatility—a bit of a “cardiac kid.” When there’s a scare in high-yield, PDI sells off. Which is why it’s as cheap as it has been in the last year, and the main reason the yield is so high. Others are scared, but we salivate.
Yes, PDI still trades at a premium to net asset value—about 5.9%—but that’s actually cheap by PDI’s lofty standards.
Granted, it’s the richest premium of PIMCO’s four big taxable-bond CEFs. Everybody wants the biggest yield. So, let’s also talk about its quieter, cheaper sibling…
PIMCO Dynamic Income Opportunities Fund (PDO) trades at just a 2.6% premium to net asset value, versus PDI’s 5.9%. PDO is also trading below its usual premium.
PDO covers 93% of its dividend with investment income. Its portfolio is a bit steadier than PDI’s (its bonds are less volatile) but with security comes a pay cut. It’s not drastic—11.7% is still elite by any measure!
So, choose your PIMCO payout weapon! (Hint: there is no wrong answer here.)
Think you could find a place for double-digit monthly payers in your retirement portfolio? Then you’ll love my Monthly Dividend Superstars report—it’s packed with fat, high-yield funds in exactly this flavor, every one of them mailing you a check every single month.