Higher inflationary expectations and rising rate worries are prevalent across the world. The Fed enacted two rate hikes in the first half and offered a hawkish guidance for the whole year. The central bank is now planning two more hikes this year. Upbeat U.S. economic recovery and a tight labor market led the Fed to be hawkish (read: Top-Performing Fixed-Income ETFs of 1H).
The U.S. Treasury bond yields have been on an uptrend since the start of the year with the benchmark yield hitting this year’s high of 3.11% in mid-May. The benchmark U.S. Treasury yield was 2.96% on Aug 8, 2018.
Meanwhile, trade war tensions between the United States and China hit a fever pitch. After targeting each other’s $34-billion worth of imports, China announced on Aug 8 that it would enact a 25% tariff on U.S. imports worth $16 billion in retaliation to the tax on an equal amount of imports to be enacted by U.S. authorities from Aug 23 (read: 5 ETF Ways to Bet on China's New Tariff Threats).
All these have raised the need for a safe and stable security in one’s portfolio.
Why Pick High-Dividend Securities?
In the above-mentioned scenario, investors may be interested in equities that have the potential to offer capital appreciation as well as benchmark-beating yields. After all, dividends are one of the ways to ride out the turbulent times.
Even if a stock or the fund falls, higher current income would go a long way in protecting investors’ total returns. After all, high-dividend ETFs provide investors avenues to make up for capital losses, if that happens at all.
We thus have zeroed in on some global high-dividend ETFs.
Global X SuperDividend Alternatives ETF (ALTY - Free Report) – Yields 7.45%
The underlying Indxx SuperDividend Alternatives Index of the fund tracks the performance of the highest dividend yielding securities in each category of alternative investments, as defined by the Index Sponsor.
The fund has focus on BDCs and Private Equity (27.89%), REITs (22.84%), Covered Call Strategies (13.11%) and MLPs (10.09%), thus offering a spread-out exposure. Notably, several of its underlying asset classes have low correlation with the broader market (read: 5 ETFs for a Historically Low August).
WisdomTree Global ex-US Real Estate Fund (DRW - Free Report) – Yields 6.98%
The fund offers exposure to dividend-paying companies in the Real Estate sector in developed and emerging equity markets, barring the United States. The fund has exposure to Hong Kong (24.16%), Australia (12.69%), France (9.93%), Singapore (9.06%) and the United Kingdom (6.75%). Since several of these economies are maintaining a low interest rate policy, unlike the United States, real estate sector should perform well over there and the fund should gain.
iShares U.S. Preferred Stock ETF (PFF - Free Report) – Yields 6.11%
If bond yields continue to rise, there will be acute need for an investment instrument that could save investors from rising rate threats. Preferred stocks and the related ETFs are of those instruments. These are hybrid securities having the characteristics of both debt and equity.
The preferred stocks pay stockholders a fixed, agreed-upon dividend at regular intervals, like bonds. Preferred stocks are thus quite stable and generally have a low correlation with other income generating segments of the market like REITs, MLPs, corporate bonds and TIPs (read: Complete Guide to Preferred Stock ETF Investing).
Amplify YieldShares Senior Loan and Income ETF – Yields 6.11%
The fund gives exposure to CEFs that invest in floating rate senior loans or other floating rate debt instruments, pay dividends and are listed in the United States. Floating rate securities are also good options to play in a rising rate environment.
iShares Asia/Pacific Dividend ETF (DVYA - Free Report) – Yields 5.63%
The fund offers exposure to high-quality companies in Australia, Hong Kong, New Zealand, Singapore and Japan. Financials (23.89%), Consumer Discretionary (22.86%) and Telecommunications (18.21%) are the top three sectors of the fund.
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