A strong week for the market has stocks trending up, but it also means yields on dividend stock are headed down once again. It’s an old-story for income-hungry investors: Interest rates are still near historical lows while the market is setting all-time highs, and that’s pinching yields.
Naturally, those trends have investors in dividend stocks reaching for high yield. But they need to be careful. After all, it tends to be the case that the higher the yield, the higher the risk. Bonds and dividend stocks with double-digit percent yields aren’t throwing off all that cash out of the goodness of their hearts.
That’s why it’s imperative to diversify the high-yield portion of your income and equity-income portfolios. This helps mitigate some of the risk associated with higher yielding stocks and bonds because the odds of everything going down at once are much lower than a meltdown in a single security.
One cheap and easy way to diversify your high-yield holdings in dividend stocks (and bonds) is to put together a portfolio of dividend-paying exchange-traded funds. True, narrow sector or style ETFs can be just as risky as individual stocks if the right kind of bad news comes along. But — again — a little diversification among ETFs can go along way toward boxing that risk in.
We researched and assembled a group of high-yield dividend ETFs that could really juice up your broader portfolio. This collection of global dividend stocks, preferred shares, corporate debt and even some beaten-down emerging market stocks has an average yield of more than 6%, while still being diversified and low-cost.
Read on to learn about five of the best high-yield dividend ETFs for a diversified income portfolio: