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Seeking High-Yielding ETFs

NEW YORK ( TheStreet) -- The second quarter of 2010 was a tough one to stomach for many. However, for income and value investors, this stretch of market turmoil has provided a great opportunity to take advantage of low priced companies boasting high yields.

In many cases, the best way to gain access to income is through picking individual companies. However, ETFs provide the added diversification which is essential to protecting against the volatile market swings we have witnessed in recent months.

Currently, three popular sectors to watch when seeking out high yields are pharmaceuticals, energy, and technology.

Two pharma-focused ETFs to consider when looking for yield are Pharmaceutical HOLDRs (PPH) and iShares Global S&P Healthcare Sector Index Fund (IXJ).

Looking solely at yield, PPH is the strongest of these funds, boasting a yield of nearly 4%. However, it is important to note that this fund is particularly top heavy, with Johnson & Johnson (JNJ) representing more than a quarter of its total assets. Having this much weight dedicated to a single holding increases the risk in the portfolio.

A better choice for conservative pharma fans is IXJ. While the fund's yield is smaller than the HOLDRs option at 2%, it is far more diversified.

Additionally, this fund takes an international approach to the pharma industry, providing investors with access to regions of the world untouched by the PPH. Not only do investors holding this fund gain access to domestic pharma giants like JNJ and Pfizer (PFE), they also get access to international companies like Novartis (NVS) and Sanofi-Aventis (SNY).

Energy is another sector of the market boasting strong yields. Investors looking to play the highest yielding members of the oil industry should check out iShares Dow Jones U.S. Energy Sector Index Fund (IYE). Nearly 50% of this fund is dedicated to oil majors including Exxon Mobil (XOM), ConocoPhillips (COP) and Chevron (CVX) which are not only strong and stable, but also boast 3% and 4% yields.

As with IXJ, it is important to be aware that gaining the diversification that comes with owning a fund like IYE means investors will have to give up some yield. Currently, this fund offers less 2% yield.

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