ETFs that pay you to own them.
There’s yield, and then there’s yield. Let’s talk about the latter. Exchange-traded funds can give you access to just about any theme you want, and that includes dividends. However, like the stock world, if you want to dredge up significantly more income than your average blue chip, you might have to go outside your comfort zone to more risky and lesser-traveled assets. The following 10 ETFs do just that, using specialized equity classes, bonds and trading strategies to offer payouts ranging from 6 percent to nearly 20 percent.
Global X SuperDividend ETF (ticker: SDIV)
The Global X SuperDividend ETF makes up for in yield what it lacks in subtlety. This ETF invests in 100 of the highest-yield equities across the world, which includes a roughly 50 percent lean toward U.S. stocks, with the rest aimed at Australia (17 percent), Singapore (7 percent) and a handful of other countries. SDIV offers exposure to a mixture of special high-yield classes such as real estate investment trusts and master limited partnerships, but also holding traditional energy, utilities and telecoms, among other sectors. SDIV pays monthly dividends, not quarterly.
Yield: 7.3 percent
Expenses: 0.58 percent, or $58 annually per $10,000 invested
Guggenheim Shipping ETF (SEA)
Shipping stocks have been clobbered for a couple of years thanks to both low energy and commodity demand, as well as a glut of extra ships. This is an industry with severe issues, and many companies are barely clinging on to financial solvency. Thus, the SEA ETF is a risk. But it’s also a dual income-growth opportunity, as depressed stock prices have driven shippers’ yields through the roof, and a rebound in global economic activity would revive SEA holdings such as AP Moller-Maersk and Nippon Yusen.
Yield: 10 percent
Expenses: 0.65 percent
PowerShares KBW Premium Yield Equity REIT Portfolio (KBWY)
REITs are a specially designed corporate structure for companies that own and operate real estate. They receive certain tax advantages, but in return, they must pay out 90 percent of their taxable income as dividends to shareholders, leading to some high yields. The KBWY ETF invests in 29 REITs, and assigns weights based on their dividend yields. And while the fund holds stereotypical REITs that invest in things like office and residential buildings, it also includes hotel REITs like Ashford Hospitality Trust (AHT), and even prison REITs like Geo Group (GEO). KBWY also pays distributions monthly.
Yield: 6.7 percent
Expenses: 0.35 percent
VanEck Vectors Mortgage REIT Income ETF (MORT)
Not all REITs own or operate actual properties, however. Another type — the mortgage REIT (or mREIT) — instead borrows money to buy mortgages and mortgage-backed securities, and profits off the spread in interest rates. This leverage makes them risky, but they can throw off substantial dividends. MORT invests in 26 mREITS, though it’s pretty lopsided in top-three holdings Annaly Capital Management (NLY), AGNC Investment Corp. (AGNC) and Starwood Property Trust (STWD), which make up nearly 30 percent of the fund.
Yield: 8.3 percent
Expenses: 0.41 percent (includes 16-basis-point waiver)
VanEck Vectors BDC Income ETF (BIZD)
Business development companies are another high-yield asset that lend money to small- and mid-size businesses that have a hard time raising capital, and thus can be charged higher rates. BIZD holds 26 BDCs, including Ares Capital Corp. and American Capital (ACAS), which make up more than a quarter of the fund. You’ll also notice that this ETF has an exceedingly high fee. BIZD and other ETFs sometimes list “acquired fund fees” that reflect the expenses of their holdings. But don’t sweat it too much — these acquired fund fees are already represented in the performance of the BDCs.
Yield: 9 percent
Expenses: 9.2 percent
Global Listed Private Equity ETF (PEX)
Investors wanting to invest like the “smart money” have a pretty direct avenue via the PEX, which holds 30 private equity companies across the globe. The appeal of publicly traded private equity stocks like PEX holdings Onex Corp. and 3I Group is that they provide access to the returns of numerous companies you otherwise couldn’t invest in. But because each PE company essentially is its own fund, PEX is a fund of several disparate funds. Still, if you don’t care about theme and instead just want to chase collective market brainpower, PEX is your ETF.
Yield: 11.9 percent
Expenses: 0.72 percent
JPMorgan Alerian MLP Index ETN (AMJ)
Because of the complex tax rules behind MLPs — a corporate structure typically (but not always) centered around energy infrastructure — investors go back and forth between holding MLPs in an ETF, or in an exchange-traded note (which holds nothing, and instead is a debt instrument that acts like a fund). What structure you prefer ultimately is up to you. AMJ, which tracks an index of 44 MLPs, is ideal for investors looking for predictable returns, and especially for those with tax-deferred accounts, where the MLP’s tax-deferred nature is a moot point.
Yield: 7.2 percent
Expenses: 0.85 percent
Infracap MLP ETF (AMZA)
MLP ETFs throw off outstanding dividends to begin with, but AMZA turbocharges that. AMZA has a couple of twists, such as targeting undervalued MLPs and also investing in general partners. What you get is a portfolio of 38 long holdings that includes Energy Transfer Partners LP (ETP) and Williams Partners LP (WPZ). However, AMZA also may short companies, use leverage and invest in derivatives, and typically it uses a covered call strategy to generate absurdly high, consistent income. That income has masked extreme underperformance for most of AMZA’s short life, though this year, the ETF is crushing many of its peers.
Yield: 19.2 percent
Expenses: 1.15 percent
YieldShares High Income ETF (YYY)
Closed-end funds — which are similar to ETFs, but feature a fixed number of shares available for trade — are a more niche area of the market, but have huge income potential. Many CEFs invest in high-yield assets such as MLPs, REITs, junk debt, emerging-market debt and even munibonds — and some take it a step further by using leverage to generate even more income. YYY invests in 30 such CEFs, such as Gamco Global Gold, Natural Resources & Income Trust (GGN) and Royce Value Trust (RVT), providing a roughly 2-to-1 mix of bonds to equity.
Yield: 10.7 percent
Expenses: 1.86 percent
PowerShares Preferred Portfolio ETF (PGX)
Any list of high-yield ETFs wouldn’t be complete without a preferred stock fund, and PGX is one of the better options out there. Preferred stocks, in brief, are stock-bond “hybrids,” trading on an exchange like stocks but providing a regular, set payout like a bond. PGX’s portfolio — like many preferred stock ETFs — is heavy in financials, with 75 percent of the fund’s weight dedicated to sector preferreds from the likes of Barclays PLC (BCS) and HSBC Holdings PLC (HSBC). Real estate and utilities combined make up another 17 percent. PGX’s global focus has given it a performance advantage in the past few years over America-focused rival iShares U.S. Preferred ETF (PFF) and other peers.
Yield: 6 percent
Expenses: 0.5 percent
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10 ETFs That Pay Sky-High Dividends originally appeared on usnews.com
