Some High-Yield Dividend ETFs Flying Under the Radar
August 1st, 2012 at 6:00am by Tom Lydon
The low interest rate environment still has yields on a 30-year Treasury bond just under 2.5%, not enough to keep up with the cost of living. Investors that are searching for income should look at the following dividend exchange traded funds, yielding at least 10%.
Of course, investors need to be careful when stretching for yield. Higher yields usually mean more risk.
“U.S. stocks are scheduled to boost their dividend payments in the second quarter by $12 billion, pushing the pay out to an all-time record,” S&P Dow Jones Indices said. “All told, investors received a 14% boost in dividend cash payments in the second quarter.”
Trang Ho for Investor’s Business Daily reports there are five ETFs that are trending up, with yields ranging from 10%-14%.
- UBS E-TRACS 2x Wells Fargo Business Development Company ETN (NYSEArca: BDCL) With a 12-month yield of 13.93%, the ETN invests in 26 companies that lend money to small and middle sized companies. The interest rate is set equal tot hose of high yield bonds. The note is up 35.90% year-to-date.
- iShares FTSE NAREIT Mortgage Plus Capped Index (NYSEArca: REM) The yield is at 11.93% and year-to-date the fund is up 22.5%. Real estate investment trusts distribute 90% of earnings to shareholders. The near-zero interest rates allow the REITs to profit as they lend money at higher, long-term rates. [ETF Spotlight: REITs]
- UBS E-TRACS 2x Long Alerian MLP Infrastructure ETN (NYSEArca: MLPL) With a yield of 10.78% and year-to-date performance at 21.3%, companies in MLPL earn cash by transporting and storing oil. MLPs also have the added plus of dodging corporate taxes on the state and local level. [MLP ETFs: A Pipeline for Yield to Your Portfolio]
- PowerShares KBW High Divided Yield Financial (NYSEArca: KBWD) The fund yields 10.47% and is up 14.65% year-to-date. The fund invests in the financial sector, so investors that are weary of the volatility associated with it may want to exercise caution.
- PowerShares S&P 500 BuyWrite (NYSEArca: PBP) The fund is up 4.8% year-to-date and yields 10.43%. 80% of the fund invests in the S&P 500, and sells call options against their positions. A call option gives the buyer the right to buy the underlying stock at a given price by a certain date. [Four High Yield Dividend ETF Options]
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.