by Jim Woods | March 6, 2012 11:57 am
If your primary goals when investing are capturing a solid income stream and getting a decent yield on your money, then traditional debt instruments such as Treasury bonds, CDs and money market accounts haven’t been very kind to you as of late. Thanks to the near-zero interest rate policy from Ben Bernanke and his merry band of central bankers, income-starved investors have been forced to seek higher yield from nontraditional sources.
If you’re unsatisfied with the paltry platter of yield served up by the Fed, then you need to check out the menu of high-yield exchange-traded funds. Here are seven ETFs to satiate the appetite of hungry income investors:
The Claymore/Zacks Multi-Asset Income ETF (NYSE:CVY) is designed to identify companies with high income and superior risk-return profiles.
The fund does this by selecting from a variety of asset types such as common stock, ADRs, real estate investment trusts, master limited partnerships, closed-end funds, Canadian royalty trusts and traditional preferred stocks.
The diversity in CVY has helped it deliver a 5.2% yield and a very robust share price gain of 6.6% year-to-date.
If you’re looking to diversify your income portfolio with emerging market debt, then check out the PowerShares Emerging Markets Sovereign Debt ETF (NYSE:PCY).
This fund holds a variety of emerging market country bonds, and its allocations are pegged to the DB Emerging Market USD Liquid Balanced Index. Here you’ll find debt issues from countries such as Korea, Pakistan, Romania, Turkey and Vietnam. The fund boasts a yield of 5.43%, and so far in 2012 its share price is up 2.8%.
The PowerShares High Yield Corporate Bond ETF (NYSE:PHB) holds corporate bonds from some of the biggest companies listed on U.S. stock exchanges.
The fund holds debt issues from the likes of Ford Motor (NYSE:F), Goodyear Tire & Rubber (NYSE:GT), Sears Holdings (NASDAQ:SHLD) and Weyerhaeuser (NYSE:WY). These holdings have allowed PHB to post a 5.77% yield and a 1.5% price share gain so far in 2012.
The PowerShares Financial Preferred Portfolio ETF (NYSE:PGF) contains the best preferred stocks from the biggest financial institutions around. Preferred shares such as those from Bank of America (NYSE:BAC), HSBC Holdings (NYSE:HBC), JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) are among the fund’s top holdings.
PGF is a great way to get your portfolio exposed to the high-yield debt of the financial sector. Doing so pays you a 7.1% current yield, but that’s just the beginning.
The fund’s share price also is capable of some big upside. Through the first two months of the year, PGF is up more than 10%.
The PowerShares Preferred Portfolio ETF (NYSE:PGX) contains many of the same financial companies that PGF holds, although the actual preferred shares differ.
PGX contains not only financial sector preferreds, but also preferreds from a variety of other industries.
In all, the fund holds a total of 45 of the best preferred stocks out there. That variety has helped the fund yield 6.54%. It’s also helped the share price rise 4.9% so far in 2012.
The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) is based on the index of the same name, and that index is comprised of a broad representation of high-yield corporate bonds.
Companies such as BlackRock (NYSE:BLK), HCA Holdings (NYSE:HCA) and Sprint Nextel (NYSE:S) are represented in this fund’s corporate bond basket. Combined, the holdings in HYG allow the fund to have a 7.48% yield, along with a modest 0.7% year-to-date share price appreciation.
The SPDR Lehman High Yield Bond ETF (NYSE:JNK) is a collection of high-yield corporate bonds, sometimes derisively called “junk” bonds. In fact, the ticker symbol JNK pays homage to the junk label. But there’s nothing junky about the 7.5% yield of the bonds in this portfolio. There’s also nothing junky about the 2.7% gain in the fund since the beginning of the year.
JNK has many of the same holdings as HYG, but the different mix of bonds in JNK has it coming out on top of my list of high-yield ETFs for the hungry income investor.
This article was originally posted on Traders Reserve.
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