Zacks highlights three overlooked high-yield ETFs
With Treasury yields seemingly hitting new lows on a weekly basis, many investors have become desperate for higher levels of current income.
This has pushed many into ETFs that have a focus on yield, such as junk bond funds, MLP products, and more traditional equity exchange-traded securities.
These include funds that zero-in on mainstays of the dividend world like utilities or firms that have a long history of raising their payouts over time.
Unfortunately, many of these products have become ultra-popular and thus crowded trades. In fact, from a year-to-date look, ETFs that promise high yields have dominated the fund flows reports, with products targeting bonds – LQD , JNK, and HYG – preferred stock —PFF — mortgage-backed securities — MBB — and MLPs — AMJ —all adding more than USD1bn dollars in assets since the start of 2012.
However, not all dividend-focused products have been created equal nor have they received the same amount of buzz. Instead, a number of products targeting high yield securities are still overlooked despite offering up sizeable yields.
Furthermore, many of the overlooked funds are in sectors which have modest correlation levels to the aforementioned segments, suggesting that these glossed-over products could also help from a diversification perspective as well.
With this backdrop and an increased focus on yield by many investors, Zacks Investment Research has highlighted three funds which payout at least twice as much as the S&P 500, but have not received anywhere near the attention that many of their high yielding counterparts have. In fact, all three have less than USD250m in AUM, a paltry figure compared to what many of the aforementioned funds have pulled in just this year.
First Trust Dow Jones Global Select Dividend Index – The product tracks the Dow Jones Global Select Dividend Index which looks to give exposure to about 100 stocks across a variety of markets around the globe.
Guggenheim S&P Global Dividend Opportunities Index ETF – The product tracks the S&P Global Dividend Opportunities NR Index, a benchmark that consists of 100 stocks and ADRs that have at least USD1bn in market cap and are also high yielders.
PowerShares KBW High Dividend Yield Financial Portfolio – The product uses a dividend yield weighting methodology and holds roughly 36 securities in its basket, focusing in on financial service companies including BDCs, Reits, insurance, and banking firms.
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