Income-Generating & Multi-Asset Strategies in this Low-Yield Environment

Low yields and coronavirus are certainly making a formidable roadblock when it comes to fixed income investors, but there are still some income-generating opportunities as well as multi-asset strategies that investors can utilize.

One of the most significant characteristics of the post-financial crisis world has been the global persistence of low, or even negative, interest rates,” wrote Sunjiv Mainie in an S&P Global article. “The entire U.S. Treasury curve yielded below 1% for the first time in history on March 9, 2020, in the wake of the COVID-19 pandemic, before the long end reverted recently on fiscal stimulus reports. Investors seeking exposure to income-generating strategies may first consider extending into high-yield corporates or leveraged loans, but viable alternatives exist in other asset classes.”

The ProShares S&P 500 Aristocrats ETF (BATS: NOBL) tracks the S&P 500 Dividend Aristocrats Index and is ProShares’ flagship dividend growth ETF strategy. The fund targets the best of the best in dividend growth, selecting components that have increased their dividends for at least 25 consecutive years. As a result of this high-quality filter, investors are left with a portfolio of first-rate dividend payers compared to say high-yield focused funds that feature companies in precarious financial positions as a result of over-leveraging.

NOBL Chart

NOBL data by YCharts

Additionally, ProShares also offers dividend growth ETFs that focus on other market segments, like the ProShares Russell 2000 Dividend Growers ETF (BATS: SMDV) and the ProShares S&P MidCap 400 Dividend Aristocrats ETF (BATS: REGL) for those seeking quality dividend growers in the small- and mid-cap categories. REGL tracks a Dividend Aristocrats Index, which only requires 15 consecutive years of increased dividends for inclusion.

On the other hand, SMDV, which tracks the Russell 2000, the benchmark U.S. small-cap index, uses the Russell 2000 Dividend Growth Index. This index includes small-cap firms with dividend increase streaks of at least a decade.

Furthermore, investors can looks towards diversification into international markets while tracking similar dividend growth strategies. For instance, the ProShares MSCI EAFE Dividend Growers ETF (BATS: EFAD) tracks developed market Europe, Australasia and Far East companies that exhibit a minimum dividend increase streak of 10 years.

Another Multi-Asset Approach

iShares Morningstar Multi-Asset Income ETF (BATS: IYLD): the fund seeks to track the investment results of the Morningstar® Multi-Asset High Income IndexSM. The index is broadly diversified and seeks to deliver high current income while maintaining long-term capital appreciation. The fund is a fund-of-funds and invests primarily in the securities of the underlying funds that themselves seek investment results corresponding to their own underlying indexes.

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