Investors have gravitated to traditional income-producing asset classes such as dividend ETFs, high-yield bonds and preferred shares in their search for yield in a low-rate market. However, there are equity sector ETFs that are currently paying respectable dividend yields.
When looking at broad equities investments that provide extra cash on the side, investors are typically going over segments like real estate, telecoms and utilities that provide market-beating yields, according to Zacks.
Investors who are seeking broad exposure to the sectors can consider ETF options that provide broad diversification into each of the sectors.
For instance, the Vanguard Telecom Services ETF (VOX) provides exposure to the telecommunications market, which focuses on maintenance and services. Consequently, the industry is left with plenty of cash that can be divvied out to investors. The ETF has a 0.19% expense ratio and a 3.31% 30-day SEC yield.
VOX’s sub-sector allocations include alternative carriers 11.3%, integrated telecom services 62.6% and wireless telecom services 26.2%.
The real estate sector, specifically real estate investment trusts, or REITs, offer high yields because they are obligated to pay at least 90% of income to shareholders to garner a favorable tax treatment. The iShares FTSE NAREIT Real Estate 50 ETF (FTY) tracks 51 REITs. The ETF has a 0.48% expense ratio and a 3.55% 30-day SEC yield.
FTY’s top sector allocations include retail 24.6%, residential 14.5%, industrial 14.5%, health care 13.5%, mortage 7.1%, infrastructure 6.9% and timber 6.3%.
Lastly, the Utilities Select Sector SPDR (XLU) offers exposure to the utilities sector, which offers stable yields and growth. The ETF has a 0.18% expense ratio and a 3.95% 30-day SEC yield. [Dividend Hunters Pounce on Beaten-Down Utilities ETFs]
XLU’s sub-sector allocations include electric utilities 57.7%, multi-utilities 36.4%, gas utilities 3.3% and independent power producers & energy traders 2.6%.
For more information on market sectors, visit our sector ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
- real estate investment trusts