Income investors looking for ways to boost their cash flow may want to consider exchange-traded funds (ETFs) that offer hearty payouts. While money market yields have been on the decline, income-generating stocks have continued to provide attractive dividends, sometimes even outpacing stock price gains. Here are three very different ETFs that income investors may want to consider adding to their portfolios:
iShares Core High Dividend ETF:
The iShares Core High Dividend ETF is a popular choice for investors seeking a steady stream of passive income. With a current yield of 3.7%, three times higher than the S&P 500, this ETF has a long history of strong performance. It has delivered an average annual total return of nearly 10% since its inception in 2011. The fund, which has nearly $11 billion in total assets, tracks an index of 75 high-paying U.S. large-cap stocks, with a focus on consumer staples and energy companies. While the ETF may not see gains every year, its largest annual decline was only 6% in 2020, making it a relatively stable option for income investors.
Global X US Preferred ETF:
For investors looking to diversify their income-generating holdings, the Global X US Preferred ETF offers exposure to preferred stocks. Preferred shares typically offer higher yields than common stocks and have priority in the event of a corporate liquidation. This ETF, with over $2.3 billion in assets, has a yield of 6.4%, the highest among the three funds mentioned. While preferred stocks can be more sensitive to interest rate movements and credit quality, they can be a compelling option for investors seeking higher yields. Financial services companies make up the majority of this ETF, so investors should be aware of the risks associated with this sector.
Cambria Foreign Shareholder Yield:
For investors looking to add international exposure to their income portfolios, the Cambria Foreign Shareholder Yield ETF offers a unique approach to dividend investing. This fund focuses on companies that not only pay dividends but also engage in stock buybacks and debt reduction, providing a comprehensive view of shareholder yield. With a current yield of 5.4%, this ETF offers a mix of international stocks from countries like Japan, Canada, and Britain. While international investing comes with its own set of risks, including geopolitical concerns and currency fluctuations, this ETF’s emphasis on companies with strong free cash flow can help mitigate some of these risks.
In conclusion, income investors have a range of options when it comes to ETFs that offer attractive payouts. By diversifying their portfolios with funds like the iShares Core High Dividend ETF, Global X US Preferred ETF, and Cambria Foreign Shareholder Yield ETF, investors can potentially boost their cash flow while also benefiting from capital appreciation. As always, investors should carefully consider their risk tolerance and investment goals before adding any ETF to their portfolios.
