Master limited partnerships account for 21.3% of the ETF’s underlying holdings. If interest rates rise, the cost of capital for MLPs also increase, which means that investors would expect lower distributions. The asset class has historically been negatively impacted by rising rate markets.
Additionally, mortgage real estate investment trusts is 15.8% of the underlying portfolio. REITs also rallied this year as rate concerns diminished. However, mortgage REITs are very sensitive to rising rate risks as any changes to short-term rates can have a significant impact on these REITs’ profitability – mortgage REITs have provided attractive yields due to cheap financing, but higher rates ahead would mean higher funding costs.
Global X SuperDividend U.S. ETF
For more information on dividend stocks, visit our dividend ETFs category.
Max Chen contributed to this article.