It seems like we are all looking for yield from our portfolios. With rates at such low levels, it's difficult to find those yields without taking additional risk, lengthening duration, or leveraging directly or indirectly.
We looked for ETFs with high dividend yields that while not risk-free nor lacking in volatility, can provide an investor with very attractive yields. As long as you can stand the volatility or monitor them for possible exit points, the following 3 ETFs provide yields in excess of 10% and as a group, are diversified across different sectors and strategies.
They are listed in order of preference.
1. iShares FTSE NAREIT Mortgage Plus Capped Index (REM)
iShares FTSE NAREIT Mortgage Plus Capped Index Fund (the Fund), seeks investment results that correspond generally to the price and yield performance of the FTSE NAREIT All Mortgage Capped Index (the Index). The Index measures the performance of the residential and commercial mortgage real estate, mortgage finance and savings associations sectors of the United States equity market. The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. The Fund's investment advisor is BlackRock Fund Advisors. It has a 12 month yield of 11.47% paid quarterly. It is the only one of the 5 currently trading at a premium but probably still the most attractive on a relative basis. For more info, see Generate Income Through Liquid Mortgages if you prefer more diversity, or Considering REM? Invest Directly In Mortgage REITs For Higher Yields if you prefer to invest directly in individual equities.
2. PowerShares S&P 500 BuyWrite Portfolio ETF (PBP)
The PowerShares S&P 500 BuyWrite Portfolio (FUND) is based on the CBOE S&P 500 BuyWrite Index (Index). The Fund will normally invest at least 80% of its total assets in common stocks of the 500 companies included in the S&P 500® Index and will write (sell) call options thereon. The Index measures the total rate of return of an S&P 500® covered call strategy. This strategy consists of holding a portfolio indexed to the S&P 500® (Reference Index) and selling a succession of written options, each with an exercise price at or above the prevailing price level of the S&P 500®. The CBOE S&P 500 BuyWrite Index provides a benchmark measure of the total return performance of this hypothetical strategy. Dividends paid on the component stocks underlying the S&P 500® and the dollar value of option premiums received from written options are reinvested. The Fund is rebalanced and reconstituted quarterly. It has a 12 month yield of 10.32% paid quarterly. For more information, check out Covered Call ETF Performing As Designed, But Hedging Isn't Always Easy
3. PowerShares KBW Hi Div Yield Financial (KBWD)
The PowerShares KBW High Dividend Yield Financial Portfolio is based on the KBW Financial Sector Dividend Yield Index (Index). The Fund will normally invest at least 90% of its total assets in securities that comprise the Index. The Index is calculated using a dividend yield weighted methodology that seeks to reflect the performance of approximately 24 to 40 publicly listed financial companies that are principally engaged in the business of providing financial services and products, including banking, insurance and diversified financial services, in the United States. The Index may also include securities of BDCs and equity and mortgage REITs. The Fund is rebalanced and reconstituted quarterly. It has a yield of 10.42% paid monthly. To read more, KBWD: How To Buy A Bundle Of Mortgage REITs
Some of these ETFs are very volatile so I caution any investor evaluating these securities that while the yield may be appealing, the price movements may cause stomachs to turn.
Determine for yourself if any of these are worth delving into.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.