ETFs to Look At In a Low-Yield World
August 17th, 2010 at 1:00pm by Tom Lydon
I you’re looking for high yields, don’t count on finding it in Treasuries. Don’t fret – there are plenty of other places you can get it. Analysts weigh in on what asset classes and exchange traded funds (ETFs) are going to give the best yields in this climate.
David Bogoslaw for Bloomberg BusinessWeek reports that remarks from the Federal Reserve’s policymaking committee on Aug. 10 offered little hope of any upside in asset prices any time soon. The committee kept the target range for the federal funds rate at zero to 0.25%. [Why Bond ETFs Are Not That Simple.]
With that, then, here are a few nooks in the market to check out:
- Indexes. Emerginvest suggests the Dow as an option. Although the yield is around 2.94%, consider that the stocks are cheap now, leaving room for the benefits of price appreciation, too. You can play the Dow with the SPDR Dow Jones Industrial Average (NYSEArca: DIA)
- Corporate Bonds: Issuance of high-yield corporate bonds hit record levels of at least $12.9 billion last week, after climbing for five straight weeks prior to that, Bogoslaw reports. If you’re willing to accept greater risk, this area has a lot of potential. iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG)
- Dividends: The dividend markets are good for an income stream, and investors seem to know it: dividend ETFs are not seeing outflows. Some companies are offering as much as a 4% dividend now, too. SPDR S&P Dividend (NYSEArca: SDY)
- Muni-Bonds: One analyst prefers this: buy below-investment-grade corporate issues and double-B-rated bonds maturing in three to five years, which represent the best trade-off between maximizing yield and maintaining the value of your portfolio if and when interest rates rise, making your lower-yielding bonds less desirable. PowerShares Insured National Municipal Bond (NYSEArca: PZA)
- Preferred Stock: These fall somewhere between corporate debt and preferred stock, and are a relatively safe place to find yield during times of economic uncertainty. Many of these companies have triple-B ratings, have solid business models, good free cash flow and are expected to be around for decades. iShares S&P U.S. Preferred Stock Index (NYSEArca: PFF) yields 6.92% [Treasury ETFs Lift Off As Homebuilders Stay Flat.]
You can easily sort ETFs by yield by using the ETF Analyzer to find other high-yielding plays right now. Try it – it’s free!
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.