Vanguard Long-Term Bond ETF (BLV)
Dividend Yield (SEC): 4%
The Vanguard Long-Term Bond ETF (BLV) is, as the name would suggest, a way to access longer-dated debt.
BLV holds more than 2,100 different investment-grade bond issues. And while the fund is, as one would expect, chock-full of Treasury and agency bonds (at nearly 40% of the fund), industrial corporate debt makes up a significant chunk of BLV’s holdings, at about 36%. The rest of the fund is split mostly among debt from financial corporations, utilities and foreign entities.
The “long-term” moniker comes from the fund’s average maturity of just more than 24 years.
The upside? Long-dated bonds are naturally income-friendly, as the issuer has to pony up more interest for the added risk of all those extra years. The downside? Long-term bonds are extremely sensitive to interest-rate changes – precisely why BLV was so strong in the first part of 2016 as a rate hike was shelved, and why it dipped hard as a late-year increase in rates seemed increasingly likely.
BLV’s particular mix of both long-term corporates and Treasuries make it stick out, as there are few similar products on the market. The iShares Core 10+ Year USD Bond ETF (ILTB) is one of the most comparable rivals, offering a similar makeup of debt sources and duration, and even that’s a difficult comparison because of ILTB’s inclusion of junk debt.
Still, despite ILTB’s access to higher-yield junk debt, the BLV still earns the edge on total returns in the long-run, besting iShares’ product by about a percentage point since the start of 2010.
Vanguard’s BLV Delivers Long-Term Returns