Continuing the theme of sound investment opportunities for this long holiday weekend, how about some recommendations for income producing ETFs (to help pay for all the upcoming holiday expenses.) Hope everyone had a great holiday.
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For some investors, particularly those in the withdrawal phase of their investment journey, the primary goal isn't necessarily to maximize total returns. Instead, they are often focused on generating steady, consistent monthly income to support their retirement plans.
This objective can sometimes be achieved by selling shares, but some investors are hesitant to do so due to a psychological bias against selling hard-earned assets they've accumulated over time.
To address this, a variety of exchange-traded funds, or ETFs, are available, each designed with a singular focus: to provide consistent, higher-than-average monthly income. These ETFs employ diverse strategies and invest in various assets, all geared toward achieving a steady income stream.
Here are seven of the best high-yield ETFs to buy in 2023 for income:
Global X U.S. Preferred ETF (ticker: PFFD). "Preferred shares are an interesting 'hybrid strategy' – they sort of act like debt, but also move like equities," says Derek Horstmeyer, professor of finance at the George Mason University School of Business. "If you want an income-generating asset class that has more risk than bonds but less risk than equities, they might appeal to you." To access preferred shares, consider PFFD.
Picking individual preferred share issues can be difficult, as each one comes with unique terms and payouts. By buying PFFD, investors gain access to a much more diversified basket of 212 issues at a 0.23% expense ratio, many of which hail from financial sector companies. Currently, PFFD has a 6.9% 12-month trailing yield, and it also pays monthly distributions.
Global X Nasdaq 100 Covered Call ETF (QYLD). "Covered call ETFs invest in a diversified portfolio of stocks and sell, or 'write,' call options on the underlying individual companies or indices," Reddy says. "The result is a regular income stream through the premiums received from selling call options." Essentially, these ETFs trade the upside potential from their underlying investment into an immediate cash payout.
One of the most popular covered call ETFs is QYLD, which sells covered calls on the Nasdaq-100 index. Thanks to the Nasdaq-100's high volatility, QYLD is able to generate high premiums, with a 12.6% 12-month trailing yield. This ETF has made consistent monthly distributions for nine years running. However, it does charge a higher 0.6% expense ratio.
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| ETF | DIVIDEND YIELD (TRAILING 12 MONTHS) | EXPENSE RATIO | | Global X U.S. Preferred ETF (ticker: PFFD) | 6.9% | 0.23% | | Global X Nasdaq 100 Covered Call ETF (QYLD) | 12.6% | 0.6% | | JPMorgan Equity Premium Income ETF (JEPI) | 9.1% | 0.35% | | Alerian MLP ETF (AMLP) | 7.8% | 0.85% | | Global X SuperDividend REIT ETF (SRET) | 8.4% | 0.59% | | iShares iBoxx $ High Yield Corporate Bond ETF (HYG) | 6% | 0.49% | | Invesco Zacks Multi-Asset Income ETF (CVY) | 5.4% | 1.06% |
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