Hungry for yield? While the 10-year U.S. Treasury yield finished yesterday’s trading above 1.50%, marking its highest level in more than a year, that’s still a crummy rate for retirement income purposes.
A possible solution could include various exchange-traded funds offering meaty yields via income strategies that entail the likes of energy infrastructure, mortgages, real estate investment trusts, business development companies and preferred securities.
All of the funds listed below in this piece have attracted significant assets, though some are quite pricey. Many of them saw their share prices hammered last year, particularly those invested in the energy patch. But most members of this group of high-yielding products are off to fast starts this year regarding price performance, which speaks to the potential volatility that comes with chasing high-yield strategies.
But for investors with their eyes on the prize of high yield, and who are willing to tolerate the potential volatility that comes with some of these strategies, one or some of the ETFs in this group might be the ticket for juicing their investment income.
Yields are presented two ways: 30-day SEC yield and 12-month distribution yield. The SEC yield is the last 30 days of accrued income, which includes interest and dividends, as well as a fund’s expenses. The distribution yield is the last monthly distribution payment made—that number is annualized and divided by a fund’s end-of-month net asset value. The 30-day reflects expenses that would be deducted, so it’s the most accurate depiction of the yield.
The following list of 10 ETFs are presented in ascending order based on their recent SEC 30-day yields.
10. iShares Mortgage Real Estate Capped ETF (REM)
The ticker symbol of this fund might strike a chord with fans of the former Athens, Ga.-based rock band of the same name, but it also might tickle the fancy of income investors. REM tracks an index composed of U.S. REITs that hold U.S. residential and commercial mortgages.
30-day SEC Yield: 6.94%
Assets under management: $1.4 billion
Expense ratio: 0.48%
Year-to-date share price return (through Feb. 25): 5.37%
2020 share price return: -20.7%
9. Global X MLP & Energy Infrastructure ETF (MLPX)
This fund invests in master limited partnerships and similar entities in the energy infrastructure space, including pipelines and storage facilities that in theory have less sensitivity to energy prices. MLPs are publicly traded entities that must get 90% of their revenue from the transportation, storage and processing of natural resources. This is the midstream part of the production chain, and it’s an area that typically pays hefty dividends.
30-day SEC Yield: 7.49%
Assets under management: $662 million
Expense ratio: 0.45%
Year-to-date share price return: 14.8%
2020 share price return: -20.3%
8. Global X SuperDividend REIT ETF (SRET)
The underlying index comprises 30 of the highest dividend-yielding REITs globally. Ninety percent of the portfolio is North America-based, with most of that in the U.S.
30-day SEC Yield: 7.68%
Assets under management: $404 million
Expense ratio: 0.59%
Year-to-date share price return: 5.3%
2020 share price return: -36.6%
7. VanEck Vectors Mortgage REIT Income ETF (MORT)
The fund seeks to replicate an index tracking the performance of U.S. mortgage REITs. Mortgage REITs provide exposure to mortgage investments ranging from agency MBS to commercial loan origination to mortgage servicing rights. According to fund literature, yields on mortgage REITs have historically been higher than those of equity REITs.
30-day SEC Yield: 8.10%
Assets under management: $267 million
Expense ratio: 0.48%
Year-to-date share price return): 6.2%
2020 share price return: -22%
6. Invesco KBW High Dividend Yield Financial ETF (KBWD)
This product follows an index consisting of U.S. financial companies with “competitive” dividend yields across banking, insurance and diversified financial services, the latter includes business development companies.
30-day SEC Yield: 8.82%
Assets under management: $350 million
Expense ratio: 1.24%
Year-to-date share price return: 12.7%
2020 share price return: -15.4%
5. VanEck Vectors BDC Income ETF (BIZD)
BIZD is the only ETF focused on business development companies, which generate income by lending to, and investing in, private companies that tend to be below investment grade or not rated.
30-day SEC Yield: 8.95%
Assets under management: $333 million
Expense ratio: 0.40%
Year-to-date share price return: 11.7%
2020 share price return: -6.8%
4. Virtus InfraCap US Preferred Stock ETF (PFFA)
Current income is the chief objective of this fund that invests in preferred securities issued by U.S. companies. These securities can run the gamut from floating and fixed-rate preferred stock to callable preferred stock and convertible preferred stock. The fund aims to boost its yield by writing covered call options.
30-day SEC Yield: 9.32%
Assets under management: $256 million
Expense ratio: 2.01%
Year-to-date share price return: 2.4%
2020 share price return: -7.9%
3. Global X MLP ETF (MLPA)
The third Global X product on this list, as well as the second Global X product focused on energy storage and transportation, MLPA differs from the MLPX fund mentioned earlier in that it emphasizes petroleum storage and transportation, whereas MLPX has a heavier tilt toward natural gas storage and transportation.
30-day SEC Yield: 9,57%
Assets under management: $753 million
Expense ratio: 0.46%
Year-to-date share price return): 17.6%
2020 share price return: -33.8%
2. Alerian MLP ETF (AMLP)
Another fund focused on midstream energy infrastructure companies engaged in pipeline transportation, storage and processing of energy commodities. Its largest sector exposure involves the pipeline transportation of petroleum.
30-day SEC Yield: 9.67%
Assets under management: $4.7 billion
Expense ratio: 0.87%
Year-to-date share price return: 16.8%
2020 share price return: -32.2%
1. InfraCap MLP ETF (AMZA)
Once more, another fund centered on midstream master limited partnerships. The emphasis of this fund, which is sponsored by Virtus Investment Partners, is on high current income. It employs leverage (typically 20-30%) and options strategies to enhance the yield.
30-day SEC Yield: 12.99%
Assets under management: $190 million
Expense ratio: 2.41%
Year-to-date share price return: 23.8%
2020 share price return: -49.7%