J.J. Feldman, a portfolio manager at Miracle Mile Advisors LLC, also suggests the Market Vectors Fallen Angel High Yield Bond ETF (NYSEArca: ANGL) as an alternative. ANGL tracks former investment-grade global issuers that have been downgraded into junk status. The group sometimes have greater financing flexibility than companies that sell junk bonds. ANGL shows a 4.7% 30-day SEC yield.
Additionally, for a dividend option, investors can consider business development company-related ETFs. BDCs have generated high yields for investors as the are required to pay out at least 90% of interest income recieved in cash dividends. For instance, the Market Vectors BDC Income ETF (NYSEArca: BIZD) has a 8.18% 12-month yield and the exchange traded note UBS E-TRACS Wells Fargo Business Development Index ETN (NYSEArca: BDCS) has a 8.02% 12-month yield. Moreover, Feldman points out that BDCs make loans with floating rates, so the sector provides some protection against a rising rate environment. Interest rates also typically rise during an improving economy, which would also support BDCs. [BDC ETFs Could See Increased Acivity As Goldman Enters Space]
For more information on fixed-income assets, visit our bond ETFs category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of HYG and JNK.