SPDR Convertible Bond ETF: Beats the Market, But Gets No Respect

I track portfolios using software on my computer network and I use web-based applications. I even use simple tools like Yahoo Finance for instantaneous access to data.

Yet Yahoo Finance has an inexplicable quirk when it comes to the SPDR Barclays Capital Convertible Bond Fund (CWB). If you set up a portfolio with CWB in it, you’ll often get a message, “No Such Ticker Symbol.” It’s been that way for 6 solid months, ever since the fund’s inception.

How can it take so long for CWB to get the respect it deserves? After all, the SPDR Barclays Capital Convertible Bond Fund (CWB) is the only ETF that currently tracks an index of convertible securities. What’s more, it’s beating the S&P 500 SPDR Trust (SPY) with less volatility and less risk!

Perhaps convertibles are to investing like Rodney Dangerfield was to comedy. Or perhaps convertible bonds get little respect because they are hybrids in the market-based investing world. Are they stocks? Are they bonds?

Typically, convertibles are investments that may rise with the underlying company stock price… but not as much. Conversely, convertibles will usually fall with the stock price… but not as much. The more challenging concept is how and when a convertible bondholder can convert shares to common stock and at what particular price.

Yet you don’t have to master a course in “high finance” to benefit from these hybrids. Look at it this way… do you need to know how that Prius works to actually save huge dollars from the exceptional gas mileage?

Right now, the SPDR Capital Convertible Bond Fund ETF (CWB) tracks a well-diversified index of 120 different convertible securities. And… CWB has a compelling monthly payout in the area of 4%.

Credit quality isn’t AAA. (In fact, it’s Baa.) Yet that’s a heck of a lot better “credit quality” than high yield junk bonds with BBB ratings. Granted, the SPDR Barclays High Yield Bond (JNK) offers a 9% yield for the credit risk, but CWB has held its own on total return.

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[mbkelly75:]

Good job pointing this one out - my favorite screener (Finviz.com) does not recognize them either. I did find them in a couple of other places so they CAN be found. That dividend is 6.3% now at today's price. Thank you - I will keep this one in mind.

Nov 05 12:36 PM

[Thomas Smic...:]

I have this ETF in my portfolio and concur with your article.

Nov 05 04:09 PM