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 $1.61 for a current yield of 3.77%.
The securities in the fund are convertible under various terms into the shares of common stock, thus they will generally move with the market but have less volatility.
I first recommended CWB in the Trade of the Day on Feb. 20, at $41.76, saying, “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 I noted, “A break above $42 should result in a continuation of its bull market advance.”
On Monday, CWB broke to a new closing high of $42.98. The ETF should continue heading north while providing an attractive yield. This is an excellent investment for those investors who plan to “sell in May” and are looking for a place to house their capital until October.