Other high-yielding instruments, such as master limited partnerships, real estate investment trusts or preferred stocks, require additional considerations. [Master Limited Partnership ETFs]
For example, the MLP structure allows them to pay out most of their revenue in the form of dividends to investors. REITs also have to pay out a large chunk of their revenue to investors so that they may qualify for government tax breaks. When looking at preferred stocks, the primary consideration should be their sector allocations – preferred stock ETFs are highly exposed to the financial sector. [Preferred Stock ETFs Enjoy Fat Yields, Capital Appreciation]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.