If you’re an income investor, your primary concern is finding solid investment vehicles paying out impressive high dividend yields. Sure, there are a lot of individual stocks out there paying good dividends, but trying to determine which stocks are best can be a trying task. Fortunately, the exchange-traded fund landscape is wide enough now that you don’t have to venture into individual equities to get a diversified basket of high-dividend-yield stocks. Today, there are many ETFs that do just that, and the following five are the highest-yielding of the bunch:
iShares S&P U.S. Preferred Stock Index
Topping our list of high-dividend-yield ETFs is the iShares S&P U.S. Preferred Stock Index (NYSE:PFF). This fund seeks to track the price and yield performance of the S&P U.S. Preferred Stock Index. Preferred shares held in this ETF include Ford Motor (NYSE:F), General Motors (NYSE:GM) and HSBC Holdings (NYSE:HBC), among many other stellar dividend payers. As of March 31, the annual dividend yield on PFF was 7.35%.
PowerShares Preferred Portfolio ETF
In second place is the PowerShares Preferred Portfolio ETF (NYSE:PGX). This fund seeks investment results that correspond generally to the price and yield performance of an index called The BofA Merrill Lynch Core Fixed Rate Preferred Securities Index. Basically, with PGX you own preferred stock in some of the best financial companies around, including Barclays (NYSE:BCS), JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC). As of March 31, the annual dividend yield on PFF was 6.65%.
SPDR Wells Fargo Preferred Stock ETF
Coming in third on our list of top-yielding dividend ETFs is the SPDR Wells Fargo Preferred Stock ETF (NYSE:PSK). This fund seeks to replicate as closely as possible the total return of the Wells Fargo Hybrid and Preferred Securities Aggregate Index. As of March 31, the annual dividend yield on PSK was 5.83%.
As you can see, all three of these top-yielding ETFs hold preferred shares. The key difference between preferred stock and common stock is that, similar to bonds, the primary source of return in preferred stock usually is generated by a fixed dividend payment that must be paid out before dividends to common stockholders. The structure of preferred shares is one reason why the top three dividend-yield ETFs all feature preferred stock.
Guggenheim S&P Global Dividend Opportunities Index
Our next ETF dividend winner proves that not all high yields require preferred stock. The Guggenheim S&P Global Dividend Opportunities Index (NYSE:LVL) seeks investment results that correspond generally to the performance of an equity index called the S&P Global Dividend Opportunities Index. The index consists of a variety of equities, including Penn West Petroleum (NYSE:PWE), Franklin Resources (NYSE:BEN) and National Retail Properties (NYSE:NNN) common stock. As of March 31, the annual dividend yield on LVL was 5.53%.
WisdomTree Equity Income Fund
Rounding out the top-five list is the WisdomTree Equity Income Fund (NYSE:DHS). Appropriately, this ETF seeks to track the price and yield performance of the WisdomTree Equity Income Index. That index tracks many of the biggest large-cap stocks in the market today, including AT&T (NYSE:T), Chevron (NYSE:CVX), Pfizer (NYSE:PFE) and Johnson & Johnson (NYSE:JNJ). With DHS, you get the best of the best in dividend-paying common stock. As of March 31, the annual dividend yield on DHS was 3.8%.