Earn 5% Plus Yield With These ETFs

Higher inflationary expectations and rising rate worries are prevalent across the world. The latest Fed minutes signaled chances of a faster hike in rates in the United States this year. This pushed the yield on the 10-year U.S. Treasury bonds to 2.92% on Feb 22, up from 2.46% recorded at the start of the year (read: 5 ETFs to Bet on Post Fed Minutes).

Some U.S. asset managers expect the Federal Reserve to raise U.S. overnight interest rates four times this year, more than three penciled by Fed policymakers. As per a note released by Goldman Sachs (NYSE:GS) Asset Management last week, yield on the U.S. 10-year note is likely to hit 3.5% within the next six months as monetary policy tightening continues.

Plus, there is heightened speculation over the European Central Bank’s (ECB) possible announcement of the QE wind down. If this happens, bond yields in the Eurozone may shoot up further. ECB minutes revealed that inflation is picking up at a faster pace. Inflation expectations in the ECB survey for the first quarter of 2018 showed average inflation expectations of 1.5%, 1.7% and 1.8% for 2018, 2019 and 2020, respectively (read: ECB Meeting Puts These Euro ETFs in Focus).

Why to Pick High-Dividend Securities

As economies have rebounded and inflation rates are likely to pace up, bond yields should soar. In such a scenario, investors may be interested in equities that have the potential to offer capital appreciation as well as benchmark-beating yields. After all, dividends are one of the ways to ride out the turbulent times.

Even if the stock or the fund falls, higher current income would go a long way in protecting investors’ total returns. After all, high-dividend ETFs provide investors avenues to make up for capital losses, if that happens at all.

We thus have zeroed in on some global high-dividend ETFs. Then we broadened our vision to include several economies are looking up currently.

YieldShares High Income ETF YYY – Yields 8.29%

The underlying index of the fund, the ISE High Income Index, comprises 30 closed-end funds (CEFs) ranked highest overall by the ISE in three criteria: fund yield, discount to net asset value and liquidity. The fund charges 50 bps in fees.

Global X SuperDividend ETF (TO:DIV) – Yields 6.94%

The underlying index of the fund looks to track the performance of 100 equally weighted companies that rank among the highest dividend yielding equity securities in the world. The fund is heavy on the United States with about 43.8% exposure, followed by Australia (14.2%) and Singapore (8.4%). It charges 58 bps in fees (read: 5 High Dividend ETFs Off to a Great Start in 2018).

Global X SuperDividend U.S. ETF (TO:DIV) – Yields 6.18%

The underlying index — the INDXX SuperDividend US Low Volatility Index — looks to track the performance of 50 equally weighted common stocks, MLPs & REITs that rank among the highest dividend yielding equity securities in the United States.

Elkhorn S&P High Quality Preferred ETF EPRF – Yields 6.33%

The underlying S&P U.S. High Quality Preferred Stock Index picks fixed-rate investment grade preferred issues (BBB- or higher) from U.S. listed preferred stocks and maintains an allocation of 75% to cumulative preferred.

Global X MSCI SuperDividend EAFE ETF EFAS – Yields 5.43%

The underlying index of the fund — the MSCI EAFE Top 50 Dividend Index — invests in 50 of the highest yielding equity securities from international developed markets. Britain (26.4%), France (12.5%) and Australia (11.5%) are top three holdings of the fund.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>