Since the October 2011 lows, my clients have benefited immensely from the middle of the risk spectrum. Prominent ETF areas - high yield corporate bonds, emerging market bonds, preferreds, REITs, dividend stocks - continue to provide remarkable price appreciation as well as reliable income.
At the same time, yield doesn't always have to come from traditional places. And, at other times, you simply can't get yield from the usual suspects. (Think Treasury bonds.)
So I checked the ETF Analytics tab for the dividend road less traveled. Specifically, I wanted to identify unleveraged ETFs with dividend yields north of 5%. Then, I'd need to determine the circumstances under which I might buy the asset-- beyond the lure of the cash flow promise.
One criterion that I employed from the get-go? Ex-nay on Europe. I am not looking to make the ultimate contrarian gamble on iShares MSCI Spain (EWP) to pursue its 12%+ annualized distribution. I am not even interested in a more diversified 7% from a quasi-European investment like SPDR S&P International Dividend (DWX).
With Europe removed (more or less), 10 stock ETFs with 5%+ dividend yields and $75 million-plus in assets under management appear. They are:
|Surprising Stock ETFs With Distributions of 5%+|
|Annual Yield||AUM $Mil|
|Market Vectors Uranium/Nuclear Energy (NLR)||13.7%||$ 78|
|PowerShares S&P 500 BuyWrite Portfolio (PBP)||10.2%||$ 218|
|Market Vectors Rare Earth Strategic Metals (REMX)||7.3%||$ 163|
|iShares MSCI New Zealand Index Fund (ENZL)||6.9%||$ 109|
|Market Vectors Junior Goldminers (GDXJ)||6.6%||$ 2,024|
|Market Vectors Semiconductors (SMH)||6.1%||$ 300|
|WIlderHill Clean Energy (PBW)||5.9%||$ 136|
|SPDR S&P Emerging Mkt Small Cap (EWX)||5.5%||$ 835|
|SPDR S&P Emerging Markets Dividend (EDIV)||5.3%||$ 304|
|iShares MSCI Australia (EWA)||5.1%||$ 2,284|
Many of these contenders have seen share prices depreciate dramatically because of a global slowdown in the demand for many commodities. Miners (rare earth, junior gold miners) as well as commodity-heavy Australia have paid dearly.
Absent a global meltdown, however, both Australia (EWA) and New Zealand (ENZL) may be presenting reasonable risk-reward opportunities. EWA recently recovered its 200-day moving average. In fact, should it hold its 200-day on the next bout of selling pressure, that would be a strong technical support signal for trend-followers to consider purchasing shares.
Interestingly enough, Small-Cap Emerging Market (EWX) may already have found price support. Not only is EWX holding a 200-day trendline, but the simple moving average is beginning to show a positive slope.
For those who thought that emerging market investing had died, they may want to take a fresh look at the increasingly attractive technical and fundamental pictures (P/E below 10). I know that I will.
Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.