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TheStreet Open House

Guggenheim ETF Delivers Reliable Income

NEW YORK ( TheStreet) -- Bond investors have taken some lumps lately. During the past month, the Barclays Capital U.S. Aggregate bond index lost 1.6%, according to Morningstar. The slump was triggered by rising interest rates. When rates rise, bonds tend to fall. The hard going has left many investors struggling to find steadier income vehicles.

One solution could be ETFs that hold diversified collections of income sources. Besides foreign and U.S. bonds, the funds own dividend-paying stocks from around the world. The diversified ETFs, which yield 4% to 5%, have proved relatively resilient in the past month. Solid choices include Guggenheim Multi-Asset Income ETF (CVY), iShares Morningstar Multi-Asset Income (IYLD), and SPDR SSgA Income Allocation ETF (INKM)

A top performer is Guggenheim Multi-Asset Income, which yields 5.2%. The fund holds half a dozen different kinds of securities, including REITs and preferred shares -- which pay bond-like yields. The fund always keeps at least 50% of assets in dividend-paying stocks. Holdings include such blue chips as Verizon (VZ) and pharmaceutical giant Merck (MRK). The portfolio currently has 9% of assets in master limited partnerships (MLPs), which own pipelines and other assets that generate rich income. Boosted by the big stock stake, the fund returned 11.6% this year, compared to a loss of 1.0% for the Barclays Capital U.S. Aggregate index.

In recent years, the Guggenheim ETF's diversified approach has paid dividends. When one asset slowed, others took the lead. Big rallies in REITs and MLPs lifted results. During the past five years, the fund returned 7.4% annually, compared to 5.8% for the S&P 500 and 5.4% for the Barclays Capital U.S. Aggregate. The Guggenheim fund also topped competitors that hold only dividend stocks, including iShares Dow Jones Select Dividend Index (DVY), which returned 6.0% annually.


The Guggenheim benchmark relies on a computerized model that aims to emphasize the most attractive assets. The system focuses on stocks with high yields, low prices, and earnings growth. As MLPs rallied in recent years, their allocation slipped because the shares had become rich.

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