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  • Beat The Bond Markets With The Highest Income ETFs 0 comments
    Feb 19, 2013 5:59 AM

    Selective investments in highest income etf have outshined the bond markets with their 2012 net yield of +7%, interestingly the most bona fide benchmark of all; S & P Index managed to churn out a meager 2.4 % of dividend yield during the same year. The higher dependence of these funds on the mid-caps even present long term value growth opportunities, which are completely absent when investing in bond and other debt instruments.

    Not so long ago when investing in Govt. bonds and similar options of fixed income were good enough to create a sizable retirement corpus, investors never in their wildest dreams anticipated returns so low. The US bond markets have shrunk further in 2012 and participants aiming to generate regular income at the cost of low risks must diversify their portfolio with the broader markets in general and Equity Traded Products in particular. The highest income ETFs are built around an asset pool where the clear focus is on better dividend payments and a regular income yield that is higher than the bonds.

    As per Bank of America' [BofA] reports, the US Thirty year bond market contracted close to 5% in the past twelve months. Since this asset is a true depiction of consumables and their pricing dynamics over a long term thus the reduction indicates a clear inverse relationship between the inflation figures and the bond yields in general. The report which is derived from the indices of the Bofa Merrill Lynch also highlights that the broader treasury markets of America reduced by 1.1 % during the same period.

    A simple substitute exists in the form of the fund attuned to the Solactive Global Dividend Index. These market traded products score high on liquidity as spot trading during market hours is possible, although one should take into account that the prices are refreshed every fifteen minutes only and there is expense ratio ranging between 0.50% - 0.60%, charged by the management on an annual basis.

    The simplicity of owning the world's top hundred dividend paying securities with equal weight age and under one umbrella is a definite attraction which is further backed by the past performance of the bench mark.

    The Global Dividend Index has given year to date total returns 14.57% as of 31st December 2012 and has achieved a median dividend distribution figure of 1.95% in the ongoing first quarter of 2013.

    The basket methodology does not stop at assigning the asset dependence, even sector wise the index captures the equities from the Financials, Telecom and Consumer Discretionary sectors with about 10-13% of dependence assigned to each. The heaviest industry wise reliance is on the securities of the Real Estate Investment Trusts [REITs] that currently make up for about 20% of the Solactive benchmark.

    It is only the highest income etf that may enable foreign investors to acquire globally listed top income generating stocks which are otherwise attached with tax complexities and compliance issues through the direct equity route.

    For instance, Provident Financials PLC which makes up for 1.44% of the Solactive Global Index, has distributed dividends at a rate of 5.04% in the fiscal year ending 31/12/2012 and the dividend growth during the same period has been 15.83%. Another security from the finance sector is Standard Life PLC that has again delivered dividend yield of 4.19% as on 18/02/2013. Other top stocks from the bench mark include KGHM Polska Miedz S.A, Parkland Fuel Corporation, Free net AG and Navitas Ltd, all of which have clearly given double figure net year to date returns. As uniform spectrum is the USP, hence all the above said securities along with the other assets, share an equal clout on the index ranging between 1%-1.5 percent each.

    Highest Paying Dividend ETF delivers as per the performance of the namesake Solactive Global Dividend Index after the annual expenses of 0.58%. Maximum securities from the benchmark are listed in United States of America [27.39%] followed by Australia and United Kingdom [13.86%]. Equities from the capital markets of Singapore and Canada account for 13.41% of assets for SDIV ETF.

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