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4 ETFs with High Dividend Yields for Income Investors

If your primary goals when investing are capturing a solid income stream and getting a decent yield on your money, then traditional debt instruments such as Treasury bonds, CDs and money market accounts haven’t been very kind to you of late.  If you’re unsatisfied with the paltry platter of yield served up by the Fed, then you need to check out the menu of high-yield exchange-traded funds (ETFs).  Here are 4 ETFs to satiate the appetite of hungry income investors.

iShares FTSE NAREIT Mortgage Plus Capped Index Fund (REM) seeks to track the price performance of the underlying holdings in the FTSE NAREIT All Mortgage Capped Index.  REM has a dividend yield of 11.63%.  REM is up 14.39% year to date.  Top holdings include: (NLY) Annaly Capital Management Inc; (AGNC) American Capital Agency Corp; (CIM) Chimera Investment Corp; (MFA) MFA Financial Inc; and  (STWD) Starwood Property Trust Inc.

PowerShares KBW High Dividend Yield Financial Portfolio (KBWD) seeks to track the price performance of the underlying holdings in the KBW Financial Sector Dividend Yield Index.  KBWD has a dividend yield of 8.99%.  REM is up 11.54% year to date.  Top holdings include: (AGNC) American Capital Agency Corp; (IVR) Invesco Mortgage Capital Inc; (CIM) Chimera Investment Corp; (NLY) Annaly Capital Management Inc ; (MFA) MFA Financial Inc.

The investment objective of the Peritus High Yield ETF (HYLD) is to generate a high current income with a secondary goal of capital appreciation. HYLD is sub-advised by Peritus Asset Management, LLC.  Peritus seeks to achieve the Fund’s objective by selecting a focused portfolio of high yield debt securities that, via their coupons, generate a high current income stream.  HYLD has a dividend yield of 7.69%.  REM is up 8.55% year to date.

Powershares CEF Income (PCEF) seeks investment results that generally correspond (before fees and expenses) to the price and yield of the S-Network Composite Closed-End Fund Index SM (the “underlying index”). The fund generally invests at least 90% of its total assets in securities of U.S.-listed closed-end funds that comprise the underlying index. It is a “fund of funds,” as it invests its assets in the common shares of funds included in the underlying index rather than in individual securities (the “underlying funds”).  PCEF has a dividend yield of 8.18%.  PCEF is up 7.05% year to date.  Top holdings include: (EXG) Eaton Vance Tax-Managed Global Diversified Equity Income Fund; (ACG) AllianceBernstein Income Fund Inc; (EVW) Eaton Vance Ltd Duration Income Fund; (ETY) Eaton Vance Tax-Managed Diversified Equity Income Fund; (NFJ) NFJ Dividend Interest and Premium Strategy Fund.

High Yield ETFs for the Income Investor

Exchange traded funds (ETFs) outperformed the fund universe in 2011 and will likely continue the trend in 2012.  Investors are looking for safety and yield, and dividend ETFs offer a low-cost, transparent way to invest in a basket of companies and mitigate single-stock risks.  The following screen looked at performance, dividend yield, expense ratio and analyst recommendations.  All of these ETFs are rated a buy or hold by Ned Davis Research.  The list has some interesting ETFs such as:

POWERSHARES S&P 500 BUYWRITE PORTFOLIO (PBP) – seeks investment results that generally correspond (before fees and expenses) to the price and yield of the CBOE S&P 500 BuyWrite Index. The fund normally invests at least 80% of total assets in common stocks of the 500 companies included in the S&P 500® Index and writes (sells) call options thereon.  PBP was recently upgraded by Ned Davis Research on January 6 2012.  PBP has a high yield of 10.16% which must be in the top range of ETFs.

POWERSHARES CEF INCOME COMPOSITE PORTFOLIO (PCEF) – seeks income by being a “fund of funds” by investing in 124 different closed-end funds in various types and strategies.  This is a nice offering for investors wanting to diversify across a significant amount of CEFs without the single-CEF risk.  PCEF price performance has improved over the last 13 weeks but this is an ETF for dividends as it provides a dividend yield of 8.27%.  Top CEF holdings include: EXG, ACG, ETY, EVV, FAX, JQC, ETW, BBN, NFJ and ETJ.

SPDR BARCLAYS HIGH YIELD BOND ETF (JNK) and ISHARES IBOXX $ HIGH YIELD CORPORATE BOND (HYG) provide fixed income ETFs with high yields.  For exposure to preferred stock dividends look at these ETFs: POWERSHARES FINANCIAL PREFERRED PORTFOLIO (PGF); SPDR WELLS FARGO PREFERRED STOCK ETF (PSK; ISHARES S&P US PREFERRED STOCK INDEX (PFF); POWERSHARES PREFERRED PORTFOLIO (PGX).

Here is the list of ETFs passing the screen for high yield ETFs:

List of high yield ETFs for 2012 prepared by getrichinvestments.com

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