Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

April 6, 2011 - DWS High Income Trust (KHI-NYSE) is a closed ended fixed income mutual fund launched and managed by Deutsche Investment Management Americas Inc. The fund invests in fixed income markets of the United States, in securities of companies operating across diversified sectors. The fund invests in securities with an average credit quality of BBB or lower. It benchmarks the performance of its portfolio against the Credit Suisse High Yield Index. DWS High Income Trust was formed on April 21, 1988 and is domiciled in the United States.

To keep that yield up, management at this closed-end fund has most of its money in BB or lower rated issues. Those have been some of the better performers recently as Wall Street is starting to reach for yield again. There's also less risk at the moment because the economy is gaining some traction. Businesses are doing better, most businesses anyway, including ones that were marginal in 2008 and 2009. They're healing and paying interest on the high yield debt they issued to survive.

For continued success, the economy, domestically and internationally, has to improve. With turmoil in the Middle East, oil prices going higher, and three wars, there's plenty for investors to worry about. If that tips too much into the area of being conservative, high yield debt will lose favor as investors seek safer havens for their funds. At the moment, that isn't happening. But it could and quickly. If it does, the value of this fund will drop as it marks to market its lower-grade bonds.

A couple of other concerns: interest rates. If they rise, any company needing to roll over maturing debt will be paying higher rates. Some companies won't be able to qualify at the new levels and may default on their bonds. Also, higher rates make other bonds more attractive. Another one: too many issuers chasing fewer dollars. As corporations expand to meet new demand, they will look to issue more debt to build plants, buy equipment. Because the high-yield debt investing universe is rather well defined, there may be more issues than it can absorb. That would drive down prices and raise rates.

Some analysts forecast a return of close to 20% for this fund in 2011 and 2012, counting on continued economic recovery where investors will be more comfortable buying high-yield bonds. They also think interest rates will hold through the end of the year and rise slowly next year. If those assumptions are correct, then the return from KHI would be well above average for any investment, stocks or bonds.

Essential numbers: This is a smaller fund with a Market Cap of $165.48 million. It's currently trading at a 5% premium to its Net Asset Value (NAV). Fiscal year ends November 30. Return on equity in the last 52 weeks was 18.03%. Book value per share is $9.70. Beta is .95. In the last 52 weeks, the fund is up 10.71% (on top of the 8.80% dividend, that's a return to an investor of 19.51% in one year). There are 16.16 million shares outstanding. Insiders own 6.75%.

Income investors with a tolerance for risk will like this fund. More conservatie ones won't be convinced that a well diversified portfolio of less than investment grade bonds is appropriate. But because of that diversification and a recovering economy, this fund has less risk characteristics than it did in late 2008 when the fund's price went to $4.00 a share.