High Yield Dividend Paying Bond Fund

I just sold a terrific high yield bond fund I’ve been invested in for a few years.

Why do I say it was terrific?  Because based on my original purchase price, it was paying me a handsome 8.3 % dividend.  And the dividends came out every month just like clockwork.  Also, I sold it for a 36% gain, so I made money all around.

I’ll tell you  the specific fund in a minute, which at today’s price is still paying a great 6.13% dividend, but first to the question that must be on your mind at this point.

That is, to say it politely, what’s not to like about this fund and have I gone mad?

Okay, so I guess that was two questions.

And I’ll give you two reasons.

The first is that bonds and bond funds could very likely go down in the future.  This is because at some point interest rates are going to go up.  And, more likely, many of the people who were burned in the crash of 2008 and ran to bonds for safety are finally, slowly starting to get out of their bonds and get back into the stock market.  This will also cause bonds to go down.

My second reason had to do with the dividends.  True, the dividends were great, but I like to invest into stocks that continually increase their dividends.  And Vanguard High Yield Corporate Fund (VWEHX) was not doing that and given the possible future investment climate, it didn’t look like it would be anytime soon.  Indeed, they had slightly cut their dividend in the past.

So I thought to take my money off the table while I was in a great winning position, and use it for another investment that would grow dividends as I prefer.

So those are the reasons I sold such a terrific bond fund.

I quit while I was ahead.  And I’m looking for a better opportunity to invest in.  Stay tuned and I’ll tell you what I come up with – which will have to be pretty good to beat Vanguards performance.

To your health and prosperity – John

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