Get Bond Alternatives With These Dividend ETFs

Bonds of course are a de-facto option when it comes to getting safe haven exposure when equities have been moving the way they have so far this year. However, for harvesting more yield, there are options for fixed income investors.

“In the not-too-distant past, bonds were portrayed as a secure part of a portfolio – a safer investment than stocks,” a Kiplinger’s article said. “Investors looked to government bonds as the bedrock of a stable retirement income. But bond yields are extremely low these days, prompting some investors to seek alternatives.”

“This has sparked renewed interest in various investments that can generate passive income and stability,” the article added further.

As such, one option to look at is companies that pay dividends. Of course, fixed income investors looking to extract maximum yield don’t want just any company offering yields, which is why Vanguard has a pair of ETF options for investors looking for options domestically and internationally.

Two High-Yielding Options

With a 30-day SEC yield of 2.75% (as of February 28), one fund to look at is the Vanguard High Dividend Yield Index Fund ETF Shares (VYM). The fund comes with a low expense ratio of six basis points.

The fund employs an indexing investment approach designed to track the performance of the FTSE High Dividend Yield Index, which consists of common stocks of companies that pay dividends that generally are higher than average. The advisor attempts to replicate the target index by investing all, or substantially all, of their assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

With a 12-month yield of 4.3%, according to Morningstar numbers, another fund to consider is the Vanguard International High Dividend Yield ETF (VYMI). Other parts of the globe can offer higher dividend yields if investors are willing to accept more risk.

VYMI offers an all-in-one option, allowing investors to navigate the international debt markets without needing to pore over copious amounts of financial data to find the best opportunities. Furthermore, international investing has its own set of nuances, and VYMI can assist with taking out that guesswork.

For more news, information, and strategy, visit the Fixed Income Channel.