Weird Bond ETF Picks: SPDR Barclays Capital Convertible ETF (CWB)
Bond ETF Yield: 3.67%
While preferred stock has been widely adopted by the general investing public, convertible bonds have been largely ignored by portfolios. That’s a real shame, as the asset class can offer plenty of benefits amid rising interest rates.
See, convertibles are basically a bond with a stock option hidden inside. That option provides the issuer the ability to exchange the bond for shares of its own stock under certain conditions — generally when the price of the stock hits a certain point.
Historically, when interest rates surge — and borrowing costs rise — many issuers will convert their bonds … just as the stock markets swoon. That provides a nice total return for investors in their convertibles.
The only real way to play convertibles via ETFs is through the SPDR Barclays Capital Convertible ETF (CWB). Despite having over $2 billion in assets, CWB is still pretty ignored by the general investing public. That’s a shame because the basket of 101 different convertibles in this bond ETF has put up an impressive 14.78% annual return since 2009.
Meanwhile, CWB currently yields a market beating 3.67% distribution yield. And this bond ETF can be yours for a low expense ratio of 0.40%, or $40 per $10,000 invested.