What is Current Income
Current income is associated with strategies that seek to identify investments paying above-average distributions. Common types of current income include dividends and interest. Investment portfolios across the risk spectrum can focus on investment strategies that pay high levels of current income.
BREAKING DOWN Current Income
Current income investing is a strategy that can provide investors with consistent long-term distributions or payouts for short-term spending. Many long-term current income focused portfolios are created for individuals seeking short-term spending payouts and potential for steady long-term income in their retirement years. (See also: Some Options for Those Seeking Current Income.)
To build out the benefits of current income investing in a portfolio, investors can choose individual securities or managed investment funds. Income paying securities can include stocks, bonds or a combination of both.
Equity Income Fund Investing
Dividend paying stocks offer investors higher returns, generally with higher risks. As income paying investments, the securities combine income with return for even greater total return. In the equity market, investors will find dividend paying stocks to be among the most well established and mature. Dividend paying stocks have steady revenue, income and earnings with established payout ratio commitments. Real estate investment trusts (REITs) are a top investment option for investors seeking current income. REITs are required to pay distributions to investors due to their fund structuring.
Funds including these securities are a great way to invest for current income. Funds can provide for lower risk through diversification with similar comparative levels of yield. Within the traditional yield paying equity investment fund universe, the Snow Capital Dividend Plus Fund offers one of the highest total returns. Investing approximately 80% of the portfolio in equities, the fund reports a one-year total return of 11.30% with a trailing 12-month dividend yield of 13.27%.
Debt Income Fund Investing
Debt income securities and investment funds offer an even broader universe of choices for investors, since debt instruments are synonymous with paying fixed income to investors. Investors can invest in a range of local and international government offerings. They also have access to coupon paying corporate bonds from countries around the world.
Debt income funds build on these offerings by providing diversified portfolios of income paying investments. Following 2017’s higher trending returns from emerging markets, the Hartford Emerging Markets Local Debt Fund falls at the top of the high yield list for bond investors. The Fund is reporting a one-year total return of 19.23% with a trailing 12-month dividend yield of 26.65%.
Target-Date Funds and Annuities
Investors seeking funds for long-term investing that will pay steady streams of current income in the future can also look to annuities and target-date funds. Annuities typically offer a consistent annuity payout following a specified target date. PIMCO’s RealPath target-date funds are leading the market in return and current income in the target-date category. The PIMCO RealPath 2045 Fund has a one-year return of 18.84% and a trailing twelve-month yield of 20.44%.