This ETF could come in handy, as banks will have to pay high preferred yields to survive in this difficult environment in order to raise capital. The underlying index that this ETF tracks is a market-capitalization weighted portfolio from Wachovia, now a subsidiary of
, that is subject to their own selection methodology. It does include some international exposure.
The ETF has paid a monthly dividend since inception in 2006, ranging from 10-12 cents of late. Based on the most recent payout of 11.404 cents, the fund yields 11.6%. That's about 4 times the average yield of the benchmark
. I am including this ETF because I don't want to single out any particular bank preferred for fear that the bank might stumble, but taken collectively the yield here is simply too juicy to ignore, now that it seems very unlikely that the government would nationalize the banks.
5. Kinder Morgan Energy Partners
(KMP): This company is what's called a master limited partnership, an MLP, and MLPs like this one are often referred to as energy trusts. These MLPs pay no corporate taxes, and pass almost all of their earnings on to shareholders in the form of a distribution, which is very similar to a dividend. KMP yields about 10%, although with this kind of company the yield tends to be volatile as the distribution changes every quarter depending on how much money the company makes. The company is a pipeline operator with 26,000 miles of lines and about 170 terminals. As opposed to other companies that bring oil and natural gas out of the ground or refine it into other products, Kinder is more like a toll collector that earns money by storing and transmitting the commodities from one place to another. The tolls never stop coming as the customers rely on KMP's pipes for almost a ton of their natural gas use.