SPDR Barclays Capital Convertible Securities ETF (NYSE:CWB) — This ETF invests at least 80% of its assets in the convertible securities of the Barclays U.S. Convertible Bond Index. Its holdings include Wells Fargo Convertible Preferred, General Motors Convertible, Intel Convertible 3.25% and Gilead Sciences Convertible bonds. It pays an annualized dividend of $1.62 for a current yield of 3.88%. The securities in the fund are convertible under various terms into shares of common stock, thus they will generally move with the market but have lower volatility.
We first recommended CWB in the Feb. 20 Trade of the Day, at $41.76, and since then, it has been as high as $42.48. At that time, we said, “This investment may not have as high a return as a broad-based index but should provide some degree of downside protection because of its dividend yield and the more senior status as a holder of bonds versus stocks.” And we noted, “a break above $42 should result in a continuation of its bull market advance.”
That break has occurred and the ETF should continue its course north while providing a dividend yield of almost 4%. This is an excellent investment for those investors who have recently “nailed down” some profits and want to continue to participate in the bull market but at a much lower risk level.