8 Dividend ETFs That Pay You More
Bond investors have more options.
Yields on the 10-year U.S. Treasury bond have hit their highest rate since 2011. On the surface, that sounds like great news. Except that "high" is still just 3.1 percent. A longer-term look at bonds dating back to before the financial crisis shows Treasury yields still remain tremendously depressed. In fact, as recently as 2007, the 10-year yielded more than 5 percent, and in 2000 it was more than 6 percent. While Treasury bonds are certainly one of the most stable investments, the sad reality is 3.1 percent just won't cut it for many investors. If you're looking for more income, consider these eight dividend ETFs with yields north of 5 percent.
Invesco PowerShares KBW High Dividend Yield Financial Portfolio (ticker: KBWD)
One of the sectors that pays the biggest dividend yields is financials -- particularly smaller, targeted firms that deal with investing and lending. After all, a well-run lender can expect pretty regular inflows of capital as people make monthly payments. Financial stocks with big dividends are simply passing a chunk of that money to shareholders. KBWD focuses on the financial stocks that offer the most generous payouts. These include mid-sized investment firm Orchid Island Capital (ORC) and mortgage lender New Residential Investment Corp. (NRZ). With a strong economy and a rising-rate environment, the distributions from this dividend ETF could rise even more in the year ahead, too.
Current yield: 8.6 percent
Global X SuperDividend ETF (SDIV)
With a name like that, it's pretty obvious what the strategy is behind this fund. The SuperDividend ETF invests in 100 of the highest-yielding corporations around the world, putting yield ahead of other priorities. The result is a very impressive annual payout, yes, but more importantly investors get a mix of non-standard dividend holdings they may not find out about otherwise. Take top holdings that include AA plc, a U.K.-based roadside assistance company similar to America's AAA, or European oil and gas company Petrofac. If you're looking to branch out beyond typical dividend holdings, SDIV is a great one-stop shop.
Current yield: 7.5 percent
iShares International Select Dividend ETF (IDV)
Another globally focused dividend fund worth a look is this iShares ETF that holds 100 top dividend stocks from around the world but is biased toward some of the bigger names that you may recognize. Holdings at present include U.K. pharmaceuticals giant AstraZeneca (AZN) and French energy giant Total (TOT). Both of these stocks are mega-cap corporations listed on U.S. exchanges but don't make it into the typical funds because they are not domestically based. Geographic diversification is an important part of your portfolio, and IDV provides that with a nice yield to boot.
Current yield: 5.1 percent
ETRACS Monthly Pay 2xLeveraged US High Dividend Low Volatility ETN (HDLV)
This exchange-traded note uses financial engineering to "leverage" your dividends, effectively doubling your payout. This is a bit of a risky strategy, since leveraged funds tend to jump around a lot more, but HDLV cleverly offsets that with low volatility investments. Specifically, the HDLV focuses on favorites among high-yield investors, with top holdings that include Verizon Communications (VZ) and Altria Group (MO). These companies may not have a ton of growth ahead, but they are incredibly stable. That allows for a more aggressive approach to dividends.
Current yield: 10 percent
YieldShares High Income ETF (YYY)
Another interesting approach to dividend investing is to look beyond stocks, like this YieldShares ETF that is a kind of "fund of funds" for dividend ETF investors. It primarily invests in closed-end funds, which trade like stocks but are really more akin to mutual funds because they are simply pooled investment vehicles with an active manager guiding the strategy. Obviously, this can be risky since one manager may have a bad month -- or year -- and cost a bundle. But a diversified approach can pay off, and with 30 holdings, each of these funds all have a big-time payout giving YYY a great yield.
Current yield: 7.7 percent
SPDR Bloomberg Barclays High Yield Bond ETF (JNK)
Equity investments aren't the only way to find yield. Buying bonds is an important part of a well-diversified portfolio. High-yield bonds are one way to supercharge your yield. Known as junk bonds, these tend to be loans to corporations that don't have as firm a footing; however, a rising U.S. economy and bright growth outlook means now is a pretty good time to take a chance on businesses that may have made a few mistakes in the past. JNK does exactly that, with corporate bonds from firms like second-tier telecom Sprint Corp. (S) and hospital operator Tenet Healthcare (THC).
Current yield: 6.3 percent
iShares Preferred Stock ETF (PFF)
This iShares fund is one of the largest preferred stock ETFs with a massive $16 billion under management. Preferred stock lives between bonds and stocks; it is ownership in a corporation but usually does not carry voting rights, and typically offers more generous dividend terms than common stock but only after payments are made to a company's bondholder. This hybrid approach has been popular in recent years, where stocks have been booming and bond yields are low. Top preferred stocks in PFF right now include U.K. bank HSBC Holdings (HBC) and GMAC, the financial arm of General Motors Co. (GM).
Current yield: 5.6 percent
Guggenheim Strategic Opportunities Fund (GOF)
This closed-end fund looks holistically at where the opportunity lies and chases the opportunities it finds -- be it in bank loans, high-yield corporate bonds or preferred stock. There is more risk here, since in many ways you're relying on the formulation of a successful fund by the folks at Guggenheim instead of making a targeted bet on a specific segment of the market you like. For instance, right now bank loans represent roughly one third of the portfolio. Still, the fund remains pretty diversified -- and the yield is tremendous as it is less constrained by asset class.
Current yield: 10.4 percent
More From US News & World Report
