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With money market savings earning next to nothing, it’s difficult to keep more than the bare minimum of cash in the bank. High yield dividend ETFs offer attractive yields at relatively low risk as compared to individual equities. Their yields do suffer during economic downturns, however.

During the four-year period from Sept. 2007 to Sept. 2011, utilities such as Southern Company (NYSE:SO) have greatly outperformed high-yield dividend ETF’s. Southern Company is up 45% from September 2007 and its yield continued to increase throughout the period. Dividend ETFs have mostly decreased from 20-40% during the same period and their yields have suffered as well. Still, I know that SO won’t always outperform these ETFs and so I will continue to hold them for the foreseeable future.

I recently compared my ETFs with some of their competitors, examining the trends of their yields during the “Great Recession” as calculated based on their closing prices on 10/21/2011. The ETFs I compared are shown in the table below.

Ticker

ETF

10/21/2011 Close

Recent

12-Month Yield

DVY

iShares Dow Jones Select Dividend Index

51.78

3.56 %

IDV

iShares Dow Jones Int. Select Dividend Index

31.50

5.02 %

LVL

Guggenheim S&P Global Dividend Opportunities

13.62

5.98 %

CVY

Guggenheim Multi-Asset Income ETF

20.09

5.36 %

HGI

Guggenheim Int. Multi-Asset Income ETF

16.55

5.91 %

PGX

PowerShares Preferred Portfolio

13.78

6.91 %

PGF

PowerShares Financial Preferred Portfolio

16.59

7.48 %

The two iShares ETFs, DVY (domestic) and IDV (international), are popular large cap dividend funds. Guggenheim’s LVL is a mid-cap relative of IDV. The next two ETFs on the list are Guggenheim’s CVY (domestic) and HGI (international) multi-asset funds. Rounding the comparison out are two preferred stock funds from PowerShares, PGX, and PGF.

Only CVY and DVY were old enough to have acquired a year’s worth of distributions on Sept. 2007, the starting period of this comparison. Each data point on the following graph represents one year’s worth of distributions, divided by the closing price on Oct. 21, 2011. With the exceptions of PGX and PGF, these ETFs pay quarterly and paid out in September. Both PGX and PGF pay monthly.

12-Month Yields from Sept. 2007 to Sept. 2011

(All Yields are Relative to the Closing Price on Oct. 21, 2011)

Ticker

12 Month

High Yield

12 Month

Low Yield

Recent

12-Month Yield

(Sept. 2011)

DVY

4.89 % (6/08)

3.17 % (3/10)

3.56 %

IDV

9.26 % (6/08)

3.36 % (12/09)

5.02 %

LVL

12.19 % (9/08)

3.60 % (12/09)

5.98 %

CVY

7.07 % (9/08)

4.42 % (3/10)

5.36 %

HGI

6.65 % (9/08)

3.78 % (3/10)

5.91 %

PGX

9.75 % (1/09)

6.91 % (9/11)

6.91 %

PGF

9.28 % (11/08)

7.48 % (9/11)

7.48 %

As you can see, the income streams from the two international equity ETFs, IDV and LVL, have dropped the most precipitously of those examined. Each has steadily improved from their low yields on 12/09, however. The two multi-asset ETFs, CVY and HGI, reached their low yields on 3/10. The yields of these two ETFs have also steadily improved from the lows, with HGI surpassing CVY in terms of recovery. Somewhat worrisome although to be expected, both preferred stock ETFs (PGX and PGF) have experienced decreasing returns throughout the period. These ETFs are presently at their lows in terms of yield and can be expected to further decline in future months.

Of the ETFs examined, the multi-asset funds strike me as the most promising to add to my portfolio today. They each offer substantially higher yields than the more conservative DVY, and their yields seem to be improving at a respectable rate during the protracted economic recovery. Although they may offer lower absolute yields in the long run than LVL or IDV, their multi-asset nature seems to buffer them somewhat from economic instability. Their relative asset allocations are shown in the tables below.

CVY

HGI

Common Stock

52.50 %

Common Stock

68.96 %

MLP

12.16 %

ADR

19.47 %

REIT

9.85 %

Closed-End Fund

9.53 %

ADR

9.67 %

Royalty Trust

2.03 %

Closed-End Fund

9.57 %

Preferred Securities

6.25 %

The preferred stock ETFs are the most worrisome. With interest rates as low as they are, I would imagine these yields will continue to trend slowly downward. I presently own PGX, but I may opt to reduce that in the coming months in favor of the multi-asset income funds.

Source: Yield Trends Of Popular High-Yield Dividend ETFs During The Great Recession