DWS Strategic High Yield Tax Free A (NOTAX) Fund

One of the top rated high yield muni bond mutual funds is DWS Strategic High Yield Tax Free fund. This mutual fund invest in non investment grade municipal debt obligations. More review can be found below.

DWS Strategic High Yield Tax Free A (Ticker: NOTAX)

The investment objective of DWS Strategic High Yield Tax Free fund is to provide a high level of income exempt from regular federal income tax. This DWS fund invests most of net assets in municipalities bonds across the U.S. whose income is free from regular federal income tax. It invests some part of net assets (<20%) in bond whose income is subject to the federal alternative minimum tax (AMT). It invests about ½ of total assets in investment grade municipal securities and another half of assets in high yield debt securities.

Fund Profile

• Fund Inception Date: May 1, 2000
• Ticker Symbol: NOTAX
• CUSIP: 23337W105
• Beta (3yr): 1.54
• Rank in category (YTD): 34%
• Category: High Yield Muni
• Distribution Rate: 4.80%
• Capital Gains: 0%
• Expense Ratio: 0.94%  
• Net Assets: $ 1.92 billion
• Number of Years Up: 10 years
• Number of Years Down: 1 year
• Effective Maturity: 8.93 years
• Effective Duration: 6.64 years
• Annual Turnover Rate: 30%

Updated on 5/2/2012

DWS Strategic High Yield Tax Free A

This high yield muni bond mutual fund has total net assets of $1.92 billion as of February 2012. This bond fund is currently under the management of Philip G. Condon. It has a YTD return of 4.63%. Its dividend yield is 4.80%. The fund has just distributed its dividend on February 2012 ($0.05). It also has an annual holdings turnover of 30%. The annual expense ratio is 0.94%. This figure is lower compared to the average in the High Yield Muni category which is 1.02%. The 12b1 fee of the fund is 0.25%. The maximum sales charge of this fund is 2.75%.

Note: There are two types of municipal bond mutual funds. They are investment grade municipal bond funds and high yield municipal bond funds (or non-investment grade muni bond funds). Both have advantages and disadvantages.

This high yield municipal bond fund has its best performance of 1-year total return in 2009 with 35.39%. The only year that it has performed negatively was in year 2008 (-22.10%). It also has had 10 years of positive return and only 1 year of negative return. Based on the load adjusted return, this fixed income fund has returned 12.25% over the past 1-year, 11.98% over the past 3-year, 4.12% over the past 5-year and 4.96% over the past 10-year. Morningstar has rated this muni bond fund with 4 stars rating.

Best High Yield Municipal Bond Mutual Funds 2012

Investors can start investing in the brokerage account of this NOTAX fund with a minimum first purchase of $1,000. The minimum next subsequent investment will be $50. It can be purchased from 85 brokerages. The brokerages that provide the sale of this fund include JP Morgan, Vanguard, Edward Jones, Merrill Lynch, Fidelity Retail Funds Network, Schwab Retail, E Trade Financial, Protected Investors of America, etc. This high yield fund is also available in many other classes, such as:

• Class B: NOTBX
• Class C: NOTCX
• Class S: SHYTX
• Class Institutional: NOTIX

The top 5 states of this fund as per the geographic distribution are Texas (13%), California (10%), Florida (8%), Illinois (7%) and Puerto Rico (6%). The top sector compositions as of December 2011 are Revenue Bonds (84%), General Obligation Bonds (13%), Lease (2%) and ETM/Pre-refunded (1%). The fund has an effective maturity of 8.93 years.

According to the fund’s website, the main investment risks are: Interest rate risk, Credit risk, Focus risk, Municipal securities risk, Market risk, Inverse floating rate securities risk, Derivatives risk, liquidity risk, etc.

Pros and Cons

Advantages of investing in this fund are:

• It is rated with 4 stars rating by Morningstar and has a good long term performance
• Reputable management

Disadvantages are:

• Higher risk due to non-investment grade securities
• This class A fund has a sales load. Please check SHYTX fund or NOTIX fund for lower fee

Disclosure: No Position

Other Mutual Funds Article:

• T. Rowe Price Tax-Free High Yield Fund
• Prudential Municipal High-Income Fund