Junior Minors
The Global X Junior Miners ETF (NYSEArca: JUNR) shows a 12-month yield of 18.2%, but the fund is down 34.5% year-to-date. The fund tracks small-cap companies engaged in mining, producing, smelting and refining coal, copper, gold, iron, nickle, silver and titanium, with a market cap of $600 million.
Mining stocks have been underperforming metals for a while and took a beating as precious metals plunged this year. However, some are betting on miners as a contrarian and valuation play as the average miner stock show a forward price-to-earnings ratio of around 11, compared to 13 for world stocks.
Hong Kong
The iShares MSCI Hong Kong Small Cap Fund (NYSEArca: EWHS) has a 13.6% 12-month yield. The fund is up 8.8% year-to-date.. EWHS tracks small-cap stocks with sector weightings including consumer staples at 37%, financials 11%, technology 20% and industrials 5%.
The lower financials weight is also positive as Hong Kong is in the midst of a so-called housing property bubble.
“EWHS is viewed as more of a pure play in the small-cap equity sector, meaning it should respond quicker to the positive trends in the Hong Kong markets,” Andrew Schrage, co-founder of MoneyCrashers.com, said in the article. “Hong Kong has excellent credit and is an established trade avenue into China.”
Nevertheless, Hong Kong companies are experiencing a slowdown in growth out of mainland China.
Business Development Company (BDCs)
The UBS E-TRACS 2x Wells Fargo Business Development Company Index ETN (NYSEArca: BDCL) has a 14.2% 12-month yield. The fund is up 11% year-to-date. The leveraged debt note provides exposure to a basket of business development companies that lend money to small and mid-sized companies. BDCs accrue returns through loans and share appreciation. [A Look at Business Development Company ETFs]
“BDCs can do well as long as the economy is expanding and credit quality is improving. I would become wary of them as economic expansion matures and growth slows,” Sam Subramanian, founder of AlphaProfit Investments, said in the article.
Mortgage-Backed REITs
The iShares FTSE NAREIT All Mortgage Capped Index (NYSEArca: REM) comes with a 12.7% 12-month yield. The fund has gained 3.3% year-to-date. Mortgage real estate investment trusts have been declining over the past month on speculation g that the Fed will begin “tapering” its quantitative easing measures and higher interest rates, which threaten profits. [REIT ETFs Punished by Rising Rates Trade]
“Rising short-term rates and tightening spreads between short- and long-term interest rates can undermine these risky real estate investments,” Subramanian added.
For more information on dividends, visit our dividend ETFs category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own EWSS.