Multi-Asset Income ETFs Aim For High Yield And Diversification

David Fabian

Income investing continues to be a hot topic where investment strategists fiercely debate asset allocation strategies.

The goal is to generate an acceptable yield while maintaining a diversified approach that doesn’t severely overweigh any single asset class.

Fortunately, there are a variety of multi-asset income ETFs that make this task easier than ever.

The largest of the group is the Guggenheim Multi-Asset Income ETF (NYSE: CVY), which has over $1.2 billion invested in a diversified portfolio of 150 dividend paying stocks, REITs, MLPs, closed-end funds and preferred stocks. 

The current 30-day SEC yield on CVY is 4.91 percent and dividends are paid quarterly to shareholders.  A falling interest rate environment and stable equity prices have helped to lift CVY 4.50 percent so far this year. 

One of the benefits of owning a multi-asset ETF such as this is that investors get instant exposure to a variety of high yield asset classes in a single investment vehicle.  This can help mitigate risks of any single sector falling out of favor.

Another successful ETF in this space is the First Trust Multi-Asset Diversified Income Index Fund (NYSE: MDIV).  This fund invests in a basket of common stocks, REITs, preferred securities, MLPs and high yield bonds. 

MDIV differentiates itself by eschewing closed-end funds and instead focusing a portion of the portfolio on junk bonds.  The current yield is 5.67 percent and dividends are paid monthly to shareholders as another unique feature.

See also: Two Unique Middle East ETFs Begin Trading

For a portfolio that is more heavily weighted in fixed-income, iShares Morningstar Multi-Asset Income ETF (NYSE: IYLD) deserves consideration.  This ETF is structured as a “fund of funds” that invests in other iShares fixed-income, dividend paying stock, preferred stocks, and REIT ETFs.

The IYLD portfolio is currently structured with 60 percent bonds, 20 percent stocks, and 20 percent alternative income sources.  In addition, the fund has a global slant with nearly 20 percent of the bond exposure focused on emerging market countries. 

The current yield of IYLD is 6.47 percent and dividends are also paid on a monthly basis.

Each of these ETFs offers a compelling basket of dividend paying assets that is distinctive in its own way. 

Income investors may consider using these tools to supplement core holdings or enhance their portfolio yield above a traditional common stock or fixed-income fund.

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