The recent news on the economic front suggests a very real slowdown, and that’s prompted investors to get increasingly defensive. And when you’re talking defense, you’re talking dividend-paying equities. It should come as no surprise then that there’s been a marked increase in the amount of capital flowing into dividend-paying sectors.
A recent Barron’s article cited reports from Morgan Stanley Smith Barney stating that since early May, U.S. dividend-focused exchange-traded funds (ETFs) have attracted the third-highest level of inflows among a dozen equity categories. That’s helped such dividend-paying ETFs such as the iShares Dow Jones Select Dividend Index (NYSE: DVY) hold up much better during the recent selloff than stocks in the S&P 500 Index.
The flight to safety we’ve seen in a diverse fund like DVY, which counts corporate dividend giants such Lorillard (NYSE: LO), Chevron (NYSE: CVX) and Kimberly-Clark (NYSE: KMB) among its top holdings, is all well and good. But investors might want to get a little eclectic with their dividend ETFs.
For instance, investors now have access to a wide variety of dividend-paying, high-yielding asset classes. Two funds that fit this bill are the Guggenheim Multi-Asset Income ETF (NYSE: CVY), and its global cousin, the Guggenheim International Multi-Asset Income ETF (NYSE: HGI).
The CVY may be the ETF with the most eclectic mix of dividend-producing assets. This fund holds common stocks, American depositary receipts, REITs, master limited partnerships (MLPs), closed-end funds, Canadian royalty trusts and even preferred stocks. Top holdings in the fund include oil giant ConocoPhillips (NYSE: COP), natural gas and oil MLP Linn Energy (NYSE: LINE) and REIT Annaly Capital Management (NYSE: NLY).
CVY’s diversity makes it a great place to collect dividends and high yield (CVY boasts an annual yield of 4.52%), and it’s also great for conservative investors. That’s because if one segment of its eclectic asset mix falters, you have numerous others to help smooth out any bumps on the road.
Similar to CVY is HGI, essentially a global version of the eclectic mix of dividend producers. The international arm of Guggenheim’s dividend-equity mixture has more than 90% of its assets outside of the U.S., with the biggest country exposure concentrated in the United Kingdom, Canada and France.
Top sectors in the fund include traditional dividend-producing companies in the telecommunication services, financials and energy arena. Given its global focus, HGI is a bit more aggressive than CVY; however, its diversity still makes a great choice for conservative income seekers. The fund’s 4% current yield also makes it a very attractive place for yield-seeking income players.
With CVY and HGI, getting eclectic in your income portfolio has never been easier.
At the time of publication, Jim Woods held no positions in any of the stocks mentioned in this article.
