Diversified Income Fund Provides Range of High-Yield Picks

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

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.

View the current price, volume, performance and top 10 holdings of PCEF at ETFU.com.

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%.

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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.

Remember to look for the current price, volume, performance and top 10 holdings of PCEF at ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate exit points, please consider subscribing to my Successful ETF Investing newsletter.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

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