Three exchange-traded funds have yields of more than 9 percent – an outstanding payout in a world of low bond yields and lackluster stock returns – but investors should be aware of the heightened risks.
“Even the amount earned on low-quality bonds is dropping, with the yield spread enjoyed by investors in speculative-grade fixed income contracting in March even as the default rate rose to six-year highs,” writes Alex Rosenberg on CNBC.com
Anyone who is considering investing in any super-high-yield products, be they ETFs, stocks or bonds, are also warned to exercise caution.
"We should look at suspiciously priced assets with all the fear that you would deeply discounted street food," Max Wolff of Manhattan Venture Partners, said in a CNBC interview. "It's definitely not something you want to imbibe without a lot of skepticism."
3 Dividend Diva ETFs
- iShares Mortgage Real Estate Capped ETF (REM): “The highest-rate option among those is the iShares Mortgage ETF (REM), with a dividend yield of nearly 12 percent. This product is designed to track a set of real estate investment trusts that themselves own residential and commercial mortgages.”
- Alerian MLP ETF (AMLP): “This well-known product tracks energy master limited partnerships, and is thus a bet on American energy infrastructure. Unsurprisingly, the product has not fared well over the past year, as oil prices have tumbled.”
- PowerShares CEF Income Composite Portfolio (PCEF): “This is probably not the most expense-efficient product, as it charges a 0.5 percent management fee for bundling other products that themselves charge sometimes-hefty fees. It also appears to be far less liquid than many of its constituents. On the upside, however, the ETF houses a large number of funds, with no one or two products making up the lion's share. So for those who desire income but abjectly refuse to decide on how that income ought to be generated, this might be an attractive choice.”
© 2024 Newsmax Finance. All rights reserved.