These ETFs Offer Solid Yield in Uncertain Times
As major averages try to find a bottom, investors' insatiable appetite for yield is bigger than ever. Strangely enough, the exchanged-traded fund ( ETF ) market is often overlooked as a place to get bang for your investment dollar.
The U.S bond market isn't all that compelling with the yield on the 10-year note currently around 1.62 percent and the yield on the 30-year bond around 2.76 percent. But Dow components like Johnson & Johnson (NYSE: JNJ ) at 3.5 percent, Merck (NYSE: MRK ) at 3.8 percent, Pfizer (NYSE: PFE ) at 3.7 percent and Verizon (NYSE: VZ ) at 4.8 percent continue to tempt investors with decent yields.
At a time when good yield is hard to find, a screen of ETFs under accumulation revealed plenty of compelling opportunities. One of the most common mistakes investors make is to seek out yield without paying any attention to price performance. The ideal situation is to have both, and the following ETFs fit the bill.
Powershares Emerging Markets Sovereign Debt Portfolio (NYSE: PCY ): The fund currently yields 4.7 percent and continues to show relative price strength. It's very liquid with an average daily volume of 1.1 million shares. It's based on the DB Emerging Market USD Liquid Balanced Index which tracks the potential returns of a theoretical portfolio of liquid emerging markets U.S. dollar-denominated government bonds issued by approximately 22 emerging-market countries. The fund tends to keep its price swings on a tight leash and continues to hold above its 50-day simple moving average ( SMA ), a near-term support level.
Powershares Build America Bond Portfolio (NYSE: BAB ): If you're a believer that the U.S. economy has made it through the worst of it and 2013 will be a better year than 2012 in terms of growth, this is a compelling ETF. With a current yield of 4.8 percent, BAB is less liquid than PCY with an average daily volume of 272,000, but it's still acting well. The fund is based on the BofA Merrill Lynch Build America Bond Index which tracks the performance of U.S. dollar-denominated Build America Bonds publicly issued by U.S. states and territories. As of Tuesday's close, it was less than one percent from a 52-week high but recent price and volume price and volume trends also point toward a fund under accumulation which can often lead to higher prices.
Powershares Financial Preferred Portfolio (NYSE: PGF ): The recent market pullback has dragged financial stocks down with it, but this this fund continues to hold up relatively well. PGF is based on the Wells Fargo Hybrid and Preferred Securities Financial Index which tracks the performance of U.S.-listed securities issued by financial institutions. It yields a nifty 6.5 percent and continues to hold near highs. The fund's top-three holdings are preferred stock from HSBC Holdings (NYSE: HBC ), Bank of America (NYSE: BAC ) and ING Groep (NYSE: ING ).
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