BNY Mellon High Yield Strategies Fund: A Steady Beacon in Volatile Waters

Amid the turbulence of fluctuating interest rates and market uncertainty, income-focused investors are increasingly drawn to vehicles that balance stability with growth potential. The BNY Mellon High Yield Strategies Fund (NYSE: DHF) emerges as a compelling option, anchored by its unbroken dividend streak of $0.0175 per month since May 2024 and a strategic pivot toward floating-rate loans. This closed-end fund, managed by BNY Mellon's seasoned team, combines a disciplined income distribution policy with a dynamic asset allocation strategy—positioning it as a resilient choice for investors willing to navigate the risks of high-yield markets.

The Dividend Anchor: Consistency Amid Chaos

The fund's dividend history is a standout feature. Since March 2024, it has maintained a monthly payout of $0.0175 per share, a consistency that defies the volatility of high-yield bond markets. This translates to an annualized yield of 8.43% as of August 2025, based on the fund's recent $2.50 share price. For comparison, its 2023 yield was $0.18 annually, while 2022 offered $0.22. The current level, though lower, reflects a deliberate balance between income sustainability and risk management.

The fund's ability to sustain this payout amid rising rates and economic uncertainty underscores its operational resilience. Investors seeking steady income without locking into long-term bonds may find this stability appealing, especially as traditional fixed-income instruments face yield compression.

Strategic Shift: Floating-Rate Loans as a Volatility Hedge

In August 2024, the fund expanded its mandate to allocate up to 20% of assets into floating-rate loans, primarily senior secured instruments. This move aims to mitigate interest rate risk while capitalizing on the high-yield potential of below-investment-grade debt. Floating-rate loans adjust with prevailing rates, reducing duration risk—a critical advantage as central banks globally remain in tightening mode.

The strategy focuses on U.S. issuers and OECD members, with a preference for senior secured loans backed by collateral. This prioritization of seniority aims to reduce credit risk, though subordinated and unsecured loans may still feature in smaller allocations. The fund also uses derivatives to convert fixed-rate loans into floating-rate equivalents, further aligning its returns with rising rates.

Early results are promising. As of May 2025, the fund held 4-Star Morningstar ratings in its Bank Loan category and ranked among the top 10% of peers in 3-year performance, with a Sharpe Ratio of 1.04 signaling strong risk-adjusted returns.

Risks and Mitigations: Navigating the Storm

No high-yield strategy is without risk. Floating-rate loans trade in OTC markets, introducing liquidity challenges and valuation uncertainties. Collateral values can erode during downturns, and subordinated loans carry heightened default risk. Additionally, foreign exposure (up to 20% of assets) introduces geopolitical and currency risks.

BNY Mellon's risk-mitigation approach leans on its $53.1 trillion asset custody platform and the expertise of subadviser Insight North America LLC. The fund's focus on senior secured loans ensures collateral prioritization, while its expense ratio—capped at 0.75% through 2025—reduces cost drag. Leverage (Total Leverage) is used judiciously to enhance returns, though it amplifies volatility.

Why BNY Mellon's Scale Matters

The fund benefits from the institutional might of BNY Mellon, a global financial powerhouse overseeing $2.0 trillion in assets. This backing ensures access to robust due diligence, liquidity management tools, and risk analytics. The firm's history in credit investing—spanning decades—adds credibility to the fund's high-yield strategy, which targets sectors like energy, healthcare, and industrials.

Investment Considerations

Who should consider DHF?
- Investors seeking a monthly income stream with an 8%+ yield.
- Risk-tolerant investors willing to accept price volatility for capital appreciation potential.
- Those looking to diversify beyond traditional bonds, particularly in a rising rate environment.

Risks to Monitor:
- Liquidity traps in loan markets during sell-offs.
- Credit downgrades in high-yield issuers.
- Premium/discount dynamics as DHF's shares trade at premiums to NAV during bullish periods.

Current Attractiveness:
At a NAV of $11.12 as of June 2025 and a YTD return of 2.66%, DHF offers a compelling entry point for long-term holders. Its annualized forward yield of 8.43% and strong Lipper rankings suggest it remains competitive in its peer group.

Final Analysis: A Steady Hand in Turbulent Markets

The BNY Mellon High Yield Strategies Fund offers a unique blend of income stability and strategic adaptability. Its dividend consistency since May 2024 provides ballast in volatile markets, while its shift into floating-rate loans positions it to thrive as rates normalize. Backed by BNY Mellon's institutional strength and a disciplined risk framework, DHF is a prudent choice for investors seeking both income and growth—not without risks, but with a well-constructed defense against them.

Recommendation:
For risk-tolerant investors with a time horizon of 3+ years, DHF merits consideration as a high-yield complement to core bond holdings. Monitor its NAV closely and favor entry points when shares trade at discounts to net asset value.