Investors of all walks around the globe have been on the hunt for yield amid this historically low-rate environment. With central banks on all fronts committed to offering up seemingly never-ending stimulus programs, many have been scouring the markets for income-producing securities in lieu of chasing after risky capital gains given the towering list of economic uncertainties. Luckily, the ETF universe is vast, and when it comes to current income, investors have several dozen options [see also Monthly Dividend ETFdb Portfolio].
Investors can look to several different corners of the exchange-traded market for juicy yields; dividend ETFs are likely the most common starting point, while High Yield Bond ETFs can also beef up your portfolio’s current income without necessarily taking on excessive risk. One particular asset class that is often overlooked is the preferred segment of the equity market [see also Commodity Plays In The 2012 Dividend Aristocrats].
While preferred shares don’t necessarily feature the same upside potential as their common stock counterparts, this breed of securities has demonstrated the potential to enhance risk-adjusted returns, and deliver bond-like volatility, while also offering a stream of generally stable income. As such, we highlight three unique offerings from the Preferred Stock/Convertible Bonds ETFdb Category that warrant a closer look from those looking to beef up their portfolio’s yield:
Van Eck Market Vectors Preferred Securities ex Financials ETF (PFXF)
When it comes to juicy dividends, the financials sector is often the first place to look. However, countless investors have been burned by lucrative distributions from this corner of the market as a result of the most recent economic downturn. Investors looking to beef up their current income without concentrating their exposure on the infamous financials sector can do so through a single ticker: enter PFXF [see also 8 Dividend ETFs With Minimal Financial Exposure].
PFXF’s underlying portfolio consists of 68 holdings, spreading its assets across convertible (or exchangeable) and non-convertible preferred securities listed on U.S. exchanges; the distinguishing factor being that this fund entirely excludes exposure to companies that fall in the financial sector. This strategy may appeal to anyone who is looking to enhance their current income through preferred stock exposure, but is wary of the lucrative distributions offered by companies operating in the financial sector. PFXF features a hefty 6.27% 30-Day SEC yield that is sure to appease income-hungry investors who also value lower expected volatility.
Global X SuperIncome Preferred ETF (SPFF)
What better way to enhance your current income than to focus on the highest yielding securities in the preferred space? SPFF does just that. This Global X ETF tracks the S&P Enhanced Yield North American Preferred Stock Index, which consists of 47 securities from the United States and Canada. The underlying holdings must meet certain criteria for inclusion relating to their size, liquidity, issuer concentration and credit rating [see also 12 High-Yielding Monthly Distribution Bond ETFs].
Unlike PFXF, this ETF features a heavy allocation to the financials sector; SPFF holds nearly three-quarters of total assets in financial preferred securities, with insurance and real estate holdings making up the next two largest allocations. Top individual holdings include preferred securities from Credit Suisse, American International Group and Aegon. Similar to PXFX, this fund will make monthly distributions and its recent 30-Day SEC yield stood at 6.51%.
Global X Canada Preferred ETF (CNPF)
Investors looking to tap into a high-yield, low volatility segment in the equity market outside of the United States ought to take a closer look at Global X’s Canada Preferred ETF. This one-of-a-kind ETF makes it easy for investors to diversify their portfolios geographically while still maintaining a similar risk-return profile as domestic-based securities. Exposure to preferred shares of Canadian companies allows investors to enhance their portfolio’s yield without incurring excessive risks that may otherwise be associated with stocks in developing markets [see also Canada ETFs: 9 Ways To Play].
CNPF’s underlying portfolio consists of roughly 50 preferred stocks from Canadian issues that trade on the Toronto Stock Exchange. From an industry breakdown perspective, nearly three-quarters of total assets go to financials, while energy and telecommunication services accounting for the next biggest chunks. This ETF makes monthly distributions like the others on the list and its recent 30-Day SEC yield stood at 3.65%.
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Disclosure: No positions at time of writing.
- July 2012 ETF Roundup: Launches, Filings, And Closures
- Global X Launches “Super Income” Preferred Stock ETF (SPFF)
- Van Eck Adds Ex-Financial Preferred Stock ETF
- Canada ETFs: 9 Ways To Play
- ETFs That Should Be Commission Free But Aren’t