Maybe he coined the phrase, maybe he did not. But Jim Cramer
does deserve credit for, at the very least, popularizing the term
"accidental high-yielder." We do not want to put words in
Cramer's mouth, but an educated guess is that when he says
"accidental high-yielder," it is in reference to a good company
that has seen its shares beaten up to the point that the dividend
yield is, well, accidentally high.
When it comes to
, finding fair to decent yields is not difficult. Actually, the
universe of dividend ETFs
is rapidly expanding.
The trick is not being seduced by, in some cases, outrageously
high yields on some ETFs. These yields are high for a reason(s),
most of which are rarely positive. Consider the following
Guggenheim Solar ETF (NYSE:
) The Guggenheim Solar ETF is the most interesting case of a
high-yielding ETF, at least it is the most interesting for us ETF
nerds. Look at several different sources and all will show an
absurdly high dividend yield for an ETF tracking a sector that
usually is not a prime income destination. Yahoo Finance says
TAN's trailing 12-month yield is almost 8.9 percent. Finviz says
its 8.73 percent.
Whatever the case may be, those robust numbers are attached to
an ETF where the largest holding, First Solar (NASDAQ:
) accounts for 18.2 percent of the fund's weight, but does not
pay a dividend. Most solar stocks do not pay dividends.
recent report by Index Universe
reveals the mystery behind TAN's high yield. Long story short,
TAN's issuers loan shares of the ETF's components out, collecting
a fee in the process. If those shares happen to be in high demand
by short sellers, as many of TAN's holdings are, the fee can be
higher and TAN's investors reap the rewards.
Market Vectors Egypt Index ETF (NYSE:
) If an investor knew nothing of Egypt's two-year-plus run of
intense geopolitical instability and just happened to go to the
Market Vector's web page, EGPT's yield could be quite the
temptress. It is now 14.2 percent on a 30-day SEC basis,
according to issuer data
It is debatable how accidental this high yield really is.
Debatable because there are easily identifiable reasons why the
lone Egypt ETF is down over 16 percent in the past month. Before
anyone reading this piece gets tempted by EGPT's yield, remember
Egypt could lose its emerging markets status
and that the ETF is trading at levels that are worse than at any
point during the Arab Spring.
Global X Brazil Financials ETF (NYSE:
) Not to pick on the Global X Brazil Financials ETF, but this is
how bad the fund has been in the past month: BRAF's 14.47 percent
drop is nearly 90 basis points worse than that of the iShares
MSCI Brazil Index Fund (NYSE:
BRAF's three largest holdings account for 30 percent of the
fund's weight and the average one-month decline for that trio is
"just" 10 percent. The ETF's trailing 12-month yield of 3.67
percent (per Yahoo data) is also well in excess of any of those
top-three holdings, which are comprised of Banco Santander Brasil
), Banco Bradesco (NYSE:
) and Itau Unibanco (NYSE:
Brazil may still offer long-term promise, but the yield on
this ETF can certainly grow in the near-term.
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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