How to Find the Best High-Yield ETFs
Erratic market conditions often lead investors to seek out defensive investment options.
One such area of the market that could be given consideration in times like these is high-yield ETFs. While there are a number of ETFs out there with relatively high yields, a reasonable amount of due diligence should be done in differentiating between the potential alternatives.
For investors who are looking to go down the path of high-yield ETFs, the question arises, what characteristics are the most important to keep in mind?
"Quality, yield and safety," says Philip Yockey, President and Chief Investment Officer of Tactical Analytics, an independent private research company.Michael Krause, President of AltaVista Independent Research, agrees with Yockey on the importance of yield, but also underscores the importance of analyzing the underlying composition of high-yield ETFs. "The yield and the expense ratio are important to consider, since the expense ratio will eat into your dividend payments," he said. "Investors should also look at the sector balance of high-yield ETFs. Some are very heavily skewed towards the financial sector right now." The iShares Dow Jones Select Dividend Index (DVY) is a prime example of an ETF that is heavily weighted with financials. Financial service companies account for nearly half the fund's total weight. It has a 4.3% yield, and a concentration of financials nearly three times that of the S&P 500. DVY has top holdings that include PNC Financial Services Group (PNC), KeyCorp (KEY), AT&T (T) and Bank of America (BAC). Because of this heavy concentration in financials, the fund has underperformed the market over the past 52 weeks. The fund is down 19.3% vs. a year ago.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV