4 New ETFs For Investors Starving For Dividends


Shutterstock photo

It's a quadruple witching day of sorts for ETFs . Four different providers each happened to roll out a new fund on the same day.

They all scratch the itch for how to invest in the stock market , bonds and elsewhere for income in an era of pitifully low interest rates, says Simon Maierhofer, founder of ispyetf.com.

"Extra income comes with extra risk," Maierhofer said in an email. "No matter how desperate (you) are for income, with junk bond yields near all-time lows and stocks near all-time highs, it is prudent not to rush into high yield, higher-risk sectors."

Of course dividends can't be guaranteed. And their yields can't be listed yet because the funds haven't made a distribution.

Here's an overview of each ETF listed in alphabetical order.

1.First Trust Preferred Securities & Income : ( FPE ) The actively managed fund, subadvised by Stonebridge Advisors of Wilton, Conn., invests in preferred stock and corporate, high-yield and convertible bonds.

Preferred shares are a cross between a stock and a bond. They are senior to common stock holders for dividend payments while subordinate to bond holders. They pay a dividend and can be converted to common stock.

"This ETF is poised for steady, but slow to moderate growth and should be included in the fixed-income portion of your portfolio," Ronald Lang, principal at Atlas Wealth Management in Philadelphia with $20 million in assets under management, wrote in an email. "FPE will be very attractive to longer-term investors along with a healthy anticipated yield of 5.5%-6%. If this ETF is well managed, it appears that First Trust has added a potential gem to their already high-quality roster of ETFs."

Annual management fee: 0.85%.

Top holdings and portfolio weightings: Not available yet.

2.Market Vectors BDC Income ETF : ( BIZD ) Invests in 26 business development companies that lend money or provide services to privately held firms that are not rated or below investment grade or thinly traded public companies.

"Investing in BDCs provides exposure to private companies that many investors could not otherwise access, allowing for potential growth and yield generation," Market Vectors provider Van Eck Global said in a statement.

BDCs tend to pay fat dividends but run the risk that companies they invest in go bankrupt or default on their loans.

Annual management fee: 0.40%.

Dividend yield of underlying index: 7.60%.

Top holdings and portfolio weightings:

1.Ares Capital ( ARCC ) 15.98%

2.American Capital ( ACAS ) 14.81%

3.Prospect Capital ( PSEC ) 7.48%

4.Apollo Investment (AINV) 6.11%

5.Triangle Capital (TCAP) 4.85%

3.Pimco Foreign Currency Strategy : (FORX) Actively managed by three managers at the world's largest bond-investing firm. FORX aims to invest in foreign currencies and bonds denominated in foreign currencies that will appreciate against the U.S. dollar. It offers exposure to 18 currencies from both developed and emerging markets.

"2013 is going to be a year of 'currency wars' as the central banks of most developed countries seem be competing with each other in devaluing their currencies," Neena Mishra, ETF research director at Zacks Investment Research in Chicago, wrote in an email.

"Muddle-through growth in the U.S. coupled with continued massive easing by the Fed will likely result in the weakening of the U.S. dollar."

"The new (ETF) could be an interesting choice for the investors seeking to hedge against the dollar's decline, as most U.S. investors are heavily invested in U.S. dollar-denominated assets and have very little foreign currency exposure," she added.

Annual management fee: 0.65%.

Top country currency holdings and portfolio weightings:

1. Norway 14.99%

2. Canada 14.98%

3. Russia 9.51%

4. Mexico 9.16%

5. Sweden 8.01%

4.Yorkville High Income Infrastructure MLP : (YMLI) Tracks the Solactive High Income Infrastructure MLP Index, which includes 25 companies engaged in developing pipelines, storage and processing systems for the U.S. energy industry. Companies range from $1.3 billion to $50 billion in market value.

For tax purposes, the fund will be treated a "C" corporation, which means it will have to pay taxes on its income. Investors' returns will vary widely from that of the underlying index, which doesn't factor in the tax hit in its performance data.

Annual management fee: 0.82%.

Top holdings and portfolio weightings: Not available yet.

Follow Trang Ho on Twitter @TrangHoETFs .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing ETFs
Referenced Stocks: ACAS , ARCC , BIZD , FPE , PSEC

More from Investor's Business Daily


Investor's Business Daily

Investor's Business Daily

Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com