With bond interest rates so low, many investors are looking for relatively safe places to park their cash while also earning a reasonable yield.
Many stock-based exchange traded funds specialize in dividend-paying companies and sectors, and they may appeal to investors with a defensive mindset amid the uncertainty in global credit markets.
The biggest and oldest ETF in this category is the $6.5 billion iShares Dow Jones U.S. Select Dividend (NYSEArca: DVY). The other largest ETFs here include Vanguard Dividend Appreciation (NYSEArca: VIG), SPDR S&P Dividend (NYSEArca: SDY), WisdomTree Large Cap Dividend (NYSEArca: DLN) and PowerShares International Dividend Achievers (NYSEArca: PID).
The iShares Dow Jones U.S. Select Dividend has a 12-month yield of 3.4%. These income ETFs invest in equities so they have stock-market risks different from bond funds.
Investors can also tap ETFs that track traditional dividend-paying sectors such as utilities and real estate investment trusts, although caution is warranted when stretching for yield. [REIT ETFs Look Expensive After Big Run: Strategist]
There are ETFs that invest in high-yield corporate bonds, or “junk,” including iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG), which has a 12-month yield of 7.7%, and SPDR Barclays Capital High Yield (NYSEArca: JNK). [Be Careful When Reaching for Yield with ETFs]
Our ETF Analyzer can also be used to search for ETFs with high yields. A recent screen included these ETFs near the top of the list: First Trust STOXX European Select Dividend Index Fund (NYSEArca: FDD), PowerShares KBW High Dividend Yield (NYSEArca: KBWD) and SPDR S&P International Dividend ETF (NYSEArca: DWX)
iShares Dow Jones U.S. Select Dividend
