Latest news with #VanguardTotalCorporateBondETF
CNBC
7 days ago
- Business
- CNBC
This is one of the most attractive opportunities for income, Vanguard says. Here's what the firm likes
Bond investors still have one of the most attractive entry points in decades to generate portfolio income, according to Vanguard. Though off their highs of the year, yields have remained elevated across the Treasury and credit markets. The 10-year Treasury yield is currently around 4.4% and the Vanguard Total Bond Market ETF (BND) , which provides broad exposure to the taxable investment-grade U.S. market, has a 30-day SEC yield of 4.39%. Bond yields move inversely to prices. BND YTD mountain Vanguard Total Bond ETF year to date Fixed income has also been a stabilizer to portfolio performance this year thanks to their higher starting yields, the firm said a recently released third-quarter outlook. "Higher income returns have helped provide a cushion against recent market volatility, keeping bond returns steady amidst larger swings in equities," the report said. Finding opportunity Vanguard sees opportunities across sectors. Within Treasurys, the firm expects a range-bound environment and prefers holding duration exposure in the belly of the yield curve. When it comes to credit, investment-grade corporates and other high-quality credits offer the most compelling risk-adjusted returns, Colleen Cunniffe, Vanguard's head of global taxable credit research, told CNBC. "Investment-grade corporates remain fundamentally sound, with resilient margins, agile supply chains, and steady productivity gains helping them weather recent tariff noise," she wrote in an email. The Vanguard Total Corporate Bond ETF (VTC) currently has a 5.09% 30-day SEC yield and a 0.03% expense ratio. VTC YTD mountain Vanguard Total Corporate Bond ETF year to date Within the segment, Cunniffe likes short-dated financials for their relative value. Banks are also fundamentally sound since they are well-capitalized with conservative liquidity needs, she added. In addition, Vanguard is overweight BBB-rated industrial issuers. Cunniffe's team also favors utilities within the investment-grade space thanks to their stable cash-flow profiles and strong demand for electricity from the rise of artificial intelligence. "This demand has prompted increased capital investment, leading to more bond issuance and, in turn, more appealing valuations," she said. Outside of corporate bonds, Vanguard sees opportunities right now in mortgage-backed securities. While spreads in the bond market have fallen near some of its lowest levels in decades, MBS spreads have been higher than relative to history — which makes their pricing closer to fair value, Cunniffe said. "There are several pockets of the market that offer attractive return potential with more limited prepayment risk, including agency-backed collateralized mortgage obligations (CMOs), agency-backed specified pools, agency commercial mortgage-backed securities, and non-agency but still high-quality AAA-rated residential mortgage-backed securities (RMBS)," she said. The Vanguard Mortgage-Backed Securities ETF (VMBS) has a 30-day SEC yield of 4.21% and a 0.03% expense ratio. VMBS YTD mountain Vanguard Mortgage-Backed Securities ETF year to date. Lastly, Vanguard is overweight asset-backed securities (ABS), preferring higher-quality issuers and sectors that have proven track records though multiple economic cycles. "Structured products, especially ABS, have lagged the spread retracement we have seen in corporate bonds following the recent tariff-related volatility," Cunniffe said. "This, along with continued higher levels of new ABS issuance, have created an attractive relative value opportunity in ABS."
Yahoo
28-01-2025
- Business
- Yahoo
2 Dividend-Paying Stocks and 1 ETF With Yields Over 3.5% to Buy in 2025
With the S&P 500 (SNPINDEX: ^GSPC) yield at just 1.2%, it has become more challenging to find companies or exchange-traded funds (ETFs) that can provide a steady and sizable stream of passive income. But that doesn't mean there aren't viable options if you know where to look. Kimberly-Clark (NYSE: KMB), J.M. Smucker (NYSE: SJM), and the Vanguard Total Corporate Bond ETF (NASDAQ: VTC) all yield over 3%. Here's why these two dividend stocks and this ETF are worth buying now. Scott Levine (Kimberly-Clark): It's hard to argue with the allure of picking up a leading consumer staples stock like Kimberly-Clark and watching the ample dividend income consistently roll in -- as it has done at increasingly higher amounts for over five decades, resulting in the stock earning the title of Dividend King. Skeptics will often balk at high-yield dividend stocks for fear that the company is not standing on firm financial footing. However, this is hardly the case with Kimberly-Clark. Income investors would be well-served to strongly consider clicking the buy button on the stock -- along with its 3.9% forward-yielding dividend -- while it's hanging on the discount rack. With a history dating back to 1872, Kimberly-Clark has grown into a dominant player in the consumer staples industry. Whether you're a new parent who relies on Huggies to protect your little one or a teacher with a box of Kleenex on your desk, the odds are extremely strong that you're using a Kimberly-Clark brand -- or several -- on a daily basis. With such an impressive portfolio of brands, ranging from baby care to adult care, Kimberly-Clark generates strong and consistent cash flow. This cash flow should assuage skeptics' concerns that the dividend is on shaky ground. Over the past decade, it's clear that Kimberly-Clark has generated free cash flow from which it can source its payout to shareholders. And it's not only the cash flow that speaks to the security of the payout. Over the past five years, Kimberly-Clark has averaged a 76.6% payout ratio. As a Dividend King, Kimberly-Clark has demonstrated a steadfast commitment to rewarding shareholders. With the stock trading at 16.3 times trailing earnings, a discount to its five-year average price-to-earnings (P/E) ratio of 22.5, today seems like a great time to load up the shopping cart with Kimberly-Clark stock. Daniel Foelber (J.M. Smucker): Packaged-food companies like J.M. Smucker have gotten hammered in recent months, with many industry leaders hovering around multi-year lows. Inflation is taking its toll on the industry as buyers watch grocery spending. Packaged-food companies face a one-two punch of weakening pricing power and demand for their products, so it's understandable why the industry is out of favor. But the sell-off has arguably gone too far, especially for a top company like J.M. Smucker. The company's brands -- like Jif, Uncrustables, Milk-Bone, Hostess, and others -- span various categories, including coffee, frozen foods, snacks, spreads, pet food, baked foods, and more. J.M. Smucker's growth hasn't been stellar in recent years, but revenue is still at an all-time high, and margins are excellent. What's more, the company sports a P/E ratio of just 10.5. That's simply too cheap to ignore for a balanced company with solid brands. To top it all off, J.M. Smucker has 23 consecutive years of dividend increases and a yield of 3.8%. That's a far longer streak of increasing the payout compared to peers like Kraft Heinz, General Mills, Campbell's, and Conagra Brands. However, investors looking for the ultimate track record among packaged-food companies should take a closer look at Dividend King Hormel Foods -- which has 59 consecutive years of dividend raises. With its price around a five-year low, investors are getting an excellent opportunity to scoop up shares of J.M. Smucker while boosting their passive income stream. By investing $2,500 in J.M. Smucker, you can expect to earn about $95 in passive income in 2025. Lee Samaha (The Vanguard Corporate Bond ETF): If you ever heard the investment maxim "Don't fight the Fed" and are sympathetic to it, then this 4.5%-yielding corporate bond ETF will interest you. For the uninitiated, this isn't anything to do with avoiding a punchup with Roger Federer, a package delivery worker, or an FBI agent. Instead, it means not taking a position on interest rates that's in opposition to the direction of the Federal Reserve's interest rate movements. However, that's precisely what the bond market has done recently. The chart below shows the Federal Reserve reducing its interest rates. Still, the bond markets are raising interest rates by selling bonds -- the benchmark 10-year Treasury yield is higher than when the Federal Reserve cut rates. Furthermore, as shown below, market rates and high-quality corporate bonds tend to have an inverse relationship. This makes perfect sense, as when Treasury yields go up, corporate bond yields go up, meaning corporate bond prices go down. If you believe that history will prevail and the market fighting the Fed will end, this bond ETF is an excellent buy. It has an "ETF of ETF" structure whereby it invests in three other Vanguard ETFs, all of which hold no corporate bonds with a lower than (low default risk) "BBB-" rating. If corporate bond yields decline (and bond prices rise) this ETF could generate significant returns, and it doesn't hurt that investors are buying in at a 4.5% yield. Before you buy stock in Kimberly-Clark, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Kimberly-Clark wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $874,051!* Now, it's worth noting Stock Advisor's total average return is 937% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list. Learn more » *Stock Advisor returns as of January 27, 2025 Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends J.M. Smucker. The Motley Fool recommends Campbell's and Kraft Heinz. The Motley Fool has a disclosure policy. 2 Dividend-Paying Stocks and 1 ETF With Yields Over 3.5% to Buy in 2025 was originally published by The Motley Fool
