5 Highest Yielding ETFs Of 2014


The hunt for yield lingers on, as investors still face a challenge finding it in traditional fixed-income markets. But there are plenty of other exchange-traded products serving up juicy yields, many in the double digits.

To be clear, these yields are cash dividends these ETFs return to investors, calculated as a percentage of share prices.

Of note, the highest-yielding strategy so far in 2014, using trailing 12 month yields, is a leveraged strategy—unsurprisingly, a REIT-focused one at that. The Etracs Monthly Pay 2x Leveraged Mortgage REIT ETN (MORL) is shelling out a yield of 19.2 percent.

The UBS-backed ETN serves up exposure to a cap-weighted index of U.S. REITs as well as foreign REITs that derive at least 50 percent of their revenues from mortgage-related activity.

But we decided to exclude leveraged and inverse strategies from our pool. With that, we list here the five highest-yielding ETPs right now. (Data as of July 2.)

5. db X-trackers MSCI Brazil Hedged Equity ETF (DBBR | D-43)

DBBR is serving up a dividend yield of 12.3 percent.

While not the only ETF to offer access to the Brazilian equity market, it’s the only one to hedge against exposure to the Brazilian real—a feature that impacts the pattern of returns of the fund as the currency fluctuates against the dollar.

DBBR tracks a market-cap-weighted index of Brazilian firms covering the entire market-cap spectrum, hedging out currency exposure. Year-to-date, the fund has struggled to break to the upside, tallying losses of 4.7 percent.

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4. Market Vectors Mortgage REIT Income ETF (MORT | B-93)

MORT is serving up a dividend yield of 12.4 percent.

REIT ETFs have made a lot of headlines this year for the hefty yields they’re delivering, if not to say outperformance relative to the stock market. MORT fits that bill perfectly, delivering what we tallied as the fourth-highest yield in the ETF universe this year.

The fund invests in mortgage REITs, and while it’s cheaper than competing iShares Mortgage Real Estate Capped ETF (REM | B-97) with a 0.41 percent expense ratio, it’s not as liquid. It trades with an average spread of 17 basis points, according to our ETF screener.

MORT is relatively concentrated, as are most in this mortgage equity segment, comprising only 25 securities, and it allocates about a third of the portfolio to two names alone (Annaly Capital Management and American Capital Agency).

Still, year-to-date, MORT has now delivered total returns of more than 15 percent, far outpacing the broad stock market.

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3. Credit Suisse Gold Shares Covered Call ETN (GLDI | D-41)

GLDI is delivering a yield of 13.2 percent.

GLDI is a first-of-a-kind security that, through a “covered call” strategy, has allowed investors to capture income in gold—an asset that’s traditionally devoid of income.

In a covered-call strategy, investors can pocket a premium from the sale of call options, backed by a long position in the underlying asset. These strategies also offer some downside protection up to the value of the premium, but they usually forgo some upside for that.

GLDI offers the returns of a strategy comprising shares of GLD and one-month call options with a strike price of 103 percent of SPDR Gold Trust (GLD | A-100). GLDI pays a monthly variable coupon based on the sale of covered-call options.

So far this year, GLDI has underperformed the price of gold as measured by GLD by roughly 3 percentage points—just as it’s designed to do.

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2. iShares Mortgage Real Estate Capped ETF (REM | B-97)

REM is serving up a dividend yield of 13.4 percent. The fund is one of two REIT ETFs in this tally—MORT is No. 4—and it tracks a market-cap-weighted index of residential and commercial mortgage REITs.

Unlike MORT, REM has a narrower trading spread of 8 basis points, and it’s also the most popular U.S. REIT ETF, having more than $1.3 billion in total assets. But the fund is equally concentrated, owning only 35 securities, and allocating about a quarter of the portfolio to its top two holdings. Year-to-date, REM has delivered total returns of 15.3 percent.

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1. Credit Suisse Silver Shares Covered Call ETN (SLVO | D-41)

SLVO is serving up a yield of 16.8 percent. The fund is much like its gold counterpart, GLDI, which is also issued by Credit Suisse. The covered-call strategy comprises long shares of the iShares Silver Trust (SLV | A-99) and short one-month call options with a strike price of 106 percent of SLV.

By design, the strategy captures income in silver, which is traditionally a yield-less asset. It does so by allowing investors to pocket a premium from the sale of call options, backed by a long position in the underlying asset. Year-to-date, SLVO has tagged on gains of 8.6 percent.

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Charts courtesy of StockCharts.com


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