Shrewd income-oriented investors got creative in their search for cash payouts during the historically low interest rate environment. Among exchange traded fund offerings, some of the highest dividend payers are not what you would typically expect.
Typically, investors receive dividends as a result of stable quarterly dividend model.
Steady dividend payers usually set dividends at a fraction of yearly earnings to diminish uncertainty for investors and reassure shareholders with steady income.
With ETFs, there are a number of new dividend-generating strategies now in play. For instance, master limited partnerships and real estate investment trusts have become popular dividend sources as the companies are required to release a large portion of income as dividends in exchange for favorable tax treatment.
Additionally, there are some other country and sector specific ETFs with surprisingly attractive yields as well. Although, investors should be aware that while the dividend payouts may look great, not all dividend opportunities are docile.
It should be noted that while the Global X Junior Miners ETF (NYSEArca: JUNR) and Global X Gold Explorers ETF (NYSEArca: GLDX) show double-digit 12-month yields, the two funds made one single large distribution at the end of the last year. As a resulted, the pair was excluded from this list. The list also focuses on equity-based ETFs and closed-end fund ETFs.
Without further ado, here are the top ten dividend yielding ETFs:
PowerShares KBW High Dividend Yield Financial Portfolio (NYSEArca: KBWD): 7.97% 12-month yield
Comment: Pays a monthly dividend. Financials have been leaders in S&P 500 dividend growth over the past several years.
PowerShares CEF Income Composite (NYSEArca: PCEF): 8.12% 12-month yield
Comment: Closed-end funds, or CEFs, represent a fixed basket of securities, and the funds can be traded like any stock or ETF on an exchange. Closed-end funds can trade at a premium or discount to its net asset value because there is a fixed number of shares outstanding. CEFs also offer higher distribution rates than mutual funds in the same category because most CEFs were created with a focus on income.
Yorkville High Income MLP ETF (NYSEArca: YMLP): 8.97% 12-month yield
Comment: YMLP is an actively managed master limited partnership ETF. Dividends are paid out quarterly. MLPs build, acquire and operate transportation assets. While investors link MLPs with energy, specifically natural gas and crude oil, they are more involved with transporting the commodities. Consequently, the performance of MLPs is less dependent on commodity prices than on how much of the commodity is pushed through. [How MLP ETF Structures Affect Yields and Returns]
iShares MSCI All Country Asia ex Japan Small-Cap ETF (NYSEArca: AXJS): 9.26% 12-month yield
Comment: Dividends paid twice a year. Many sectors in other countries feature higher yields than their U.S. equivalents. A small ETF with $5.6 million, the largest country weight here is Taiwan at 22%.
WisdomTree Global ex-US Real Estate Fund (NYSEArca: DRW): 10.36% 12-month yield
Comment: As is often the case with U.S. common stocks, REITs have international equivalents with higher yields. DRW proves as much. Top country weights are Hong Kong, Australia and Singapore. That trio is 53% of DRW’s weight.
PowerShares Global Listed Private Equity Portfolio (NYSEArca: PSP): 10.46% 12-month yield
Comment: PSP’s includes securities, ADRs and GDRs of 40 to 75 private equity companies, including business development companies (BDCs), master limited partnerships (MLPs) and related entities. Private equity is raised from retail and institutional investors, and then used to fund new technologies, strengthen a company’s finances or expand the firm. This type of equity capital is not listed on a public exchange. [High-Yield Private Equity ETF for Improving Economic Conditions]
Market Vectors Mortgage REIT Income ETF (NYSEArca: MORT): 10.86% 12-month yield
Comment: Mortgage-backed REITs, or mREITs, are vulnerable in a rising rate environment. The companies have cut distributions and performed poorly during past rising rate environments. [Mortgage ETF Paying 15% Yield After Price Pullback]
iShares MSCI Hong Kong Small-Cap ETF (NYSEArca: EWHS): 13.27% 12-month yield
Comment: A surprise, but AAA-rated Hong does features a decent yield. EWHS has $6.1 million in AUM.
iShares Mortgage Real Estate Capped ETF (NYSEArca: REM): 15.36% 12-month yield
Comment: See MORT.
iShares MSCI Singapore ETF (NYSEArca: EWSS): 19.41% 12-month yield
Comment: Similar situation to what is seen with Hong Kong and EWHS.