High-Yield Bond ETFs Could Be the Solution to Your Equity Woes

In this current low-yield environment, getting maximum with minimal risk is a challenging proposition for investors. One of the areas where dividend investors can find higher income is through high-yield bond ETFs like the iShares iBoxx $ High Yield Corporate Bond ETF (HYG).

HYG seeks to track the investment results of the Markit iBoxx® USD Liquid High Yield Index, which is a rules-based index consisting of U.S. dollar-denominated, high yield corporate bonds for sale in the U.S. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and may invest up to 10% of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index.

HYG offers investors:

  1. One of the most widely used high yield bond ETFs
  2. Exposure to a broad range of U.S. high yield corporate bonds
  3. Use to seek higher income

HYG Chart

Stock News gave HYG a nice push for the month of December:

“Amid the holiday season, the United States has been witnessing a spike in the number of coronavirus cases,” the article noted. “As people travelled across the country to celebrate Thanksgiving, the total number of coronavirus cases in the country increased significantly.”

“Though the positive vaccine news helped the stock market show some resilience, the concerns over the second wave, and related economic impact, are expected to keep markets volatile in upcoming months,” the article added. “Amid this market uncertainty, and near-zero interest rate environment, it is wise to hedge your portfolio against risks by investing in high dividend-paying financial instruments.”

HYG has been seeing more interest of late. With a higher capacity to assume risk thanks to a potential COVID-19 vaccine in the works, investors have been more apt to seek yield in funds like HYG.

“HYG has an expense ratio of 0.49% which is at par with the category average,” the article explained. “The fund pays an annual dividend of $4.22, translating into a 4.89% yield. Its average four-year dividend yield stands at 5.4%. HYG has gained 25.9% since hitting its 52-week low of $67.52 in March. The fund has witnessed net inflows of $2.82 billion in the past six months and has gained 5.4% in the same period. It closed Friday’s trading session at $86.41 and is currently trading 2.4% below its 52-week high.”

For more news and information, visit the Equity ETF Channel.