Latest news with #iSharesPreferredandIncomeSecuritiesETF
CNBC
3 days ago
- Business
- CNBC
Yields on these income-producing assets can top 6%. Here are UBS' top picks in preferred securities
Long-term investors can find solid income in preferred securities, according to UBS. The assets, which have hybrid features of both stocks and bonds, have seen a muted performance so far this year, said Frank Sileo, senior fixed income strategist. Preferreds trade on exchanges like stocks, but also have par values and pay a stream of income. Similar to bonds, when the price of the preferred goes down, its yield moves higher. While spreads are tight, lack of competitive yield alternatives, banking sector fundamentals and supply-demand dynamics should remain supportive of the securities, Sileo said in a note Wednesday. Banks account for an estimated two thirds to three quarters of total preferred issuance , according to S & P Global. "For long-term investors, preferreds can provide high-quality, diverse, and durable portfolio income," Sileo wrote. Preferreds come in par values of $25 and $1,000, with the former sold to retail investors and the latter aimed at institutions. Many have long maturity dates or are perpetual, but they typically have "call dates," or points in time when they can be redeemed. UBS recommends investing in both preferred par values. The $25 par preferreds have underperformed so far this year, down 0.6% year to date, versus a 3.5% gain for $1,000 par preferreds, as of June 24, Sileo said. The performance of the lower-priced securities are somewhat more influenced by stock market trends, he noted. "This illustrates the importance of 'intra-sector diversification,'" Sileo said. "Adding USD 1,000 par preferreds may improve overall risk-adjusted performance by reducing return correlations with other sectors, including common stocks." Investors can also save on taxes compared to bonds since preferreds typically are taxed at capital gains rates, which are 0%, 15% or 20%, depending on your income. Here are some of Sileo's top picks in preferred securities in different strategies: conservative, moderate and aggressive. He uses yield-to-worst as a measure of income, which is the lowest estimated annualized yield among potential redemption date scenarios. Investors looking for broad market exposure can invest in exchange-traded funds. For example, the iShares Preferred and Income Securities ETF (PFF) has a 30-day SEC yield of 6.57% and 0.46% expense ratio. The Global X U.S. Preferred ETF (PFFD) has a 6.52% 30-day SEC yield and 0.23% expense ratio. However, the majority of the ETFs are indexed funds with limited or no exposure to $1,000 par preferreds, Sileo noted. "Given the diversity of investment choices within the preferred securities sector and the wide range of preferred ETFs, investors may consider a strategy that uses both single-security recommendations and ETF selections for a more tailored, customized investment solution," he said.
Yahoo
05-06-2025
- Business
- Yahoo
4 Top Dividend ETFs Yielding Over 4% to Buy for Easy Passive Income
The Schwab U.S. Dividend Equity ETF and Pacer Global Cash Cows Dividend ETF have yields above 4%. The JPMorgan Equity Premium Income ETF uses options to generate passive income. The iShares Preferred and Income Securities ETF holds bond-like income securities. 10 stocks we like better than Schwab U.S. Dividend Equity ETF › Exchange-traded funds (ETFs) make investing easy. These managed funds come with built-in diversification. Because of that, you can buy an ETF and sit back and let it do all the work. Many ETFs hold income-generating investments, making them ideal for those seeking passive income. Here are four top dividend ETFs yielding at least 4% to buy and hold for easy passive income. The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) tracks an index (Dow Jones U.S. Dividend 100 Index) focused on companies that pay quality and sustainable dividends. It targets higher-yielding dividend stocks that have grown their payouts at healthy rates over the past five years, which seem likely to continue. The Schwab U.S. Dividend Equity ETF has a distribution yield of slightly more than 4% based on its payments over the last 12 months. Given the fund's emphasis on holding dividend growers, it has delivered a steadily rising income stream to its investors over the years: While that past performance doesn't guarantee future success, the fund's focus on high-quality companies that grow their dividends bodes well for its ability to continue paying a steadily rising income stream. The iShares Preferred and Income Securities ETF (NASDAQ: PFF) tracks an index that holds preferred and hybrid securities. These investments are like a combination of bonds (they pay fixed income) and stocks (they represent an ownership interest). They tend to be riskier than bonds but have a lower risk profile than stocks. The fund currently holds 443 securities, primarily issued by financial institutions (70.2% of its holdings), industrial companies (18.2%), and utilities (10.2%). The ETF has a 6.6% yield based on payments over the last 12 months. That's on par with a high-yield bond fund. In addition to that high yield, which can fluctuate from month to month, the fund offers some potential for price appreciation. For example, a $10,000 investment made at the fund's inception in 2007 would be worth over $20,000 today. The JPMorgan Equity Premium ETF (NYSEMKT: JEPI) aims to distribute income to investors each month while also providing them with less volatile exposure to the equity market. The JPMorgan Equity Premium ETF has a two-fold investment strategy designed to achieve that goal: Defensive equity portfolio: The fund holds a portfolio of stocks selected based on its proprietary, risk-adjusted stock rankings to provide exposure to the market. Discipline options overlay strategy: The ETF's managers write out-of-the-money (above the current level) call options on the S&P 500 Index. By writing (or shorting) these options, it gets paid the options premium (value of the option). The strategy generates income that the fund can distribute to investors each month. The fund's strategy is very lucrative: As that chart shows, it has delivered a higher income yield than U.S. high-yield bonds (junk bonds) over the past 12 months. In addition to that lucrative passive-income stream, the fund can also deliver some price-appreciation potential from its stock portfolio. The Pacer Global Cash Cows Dividend ETF (NYSEMKT: GCOW) focuses on companies that generate lots of free cash flow. That enables these cash cows to pay lucrative dividends. The strategy-driven ETF aims to identify companies that can continue to pay attractive dividends by screening for them based on their free-cash-flow yield and dividend yield. The fund holds the top 100 companies with the highest free-cash-flow yield and highest dividend yield. It weighs them by their dividends, capping the top holding at 2% of the fund's assets. It reconstitutes and rebalances its holdings twice each year to ensure it holds the 100 top cash cow dividend stocks. The average holding in the fund has a 6.3% free-cash-flow yield and a 4.7% dividend yield. However, after expenses (the fund has a 0.6% ETF expense ratio), its annualized dividend yield is closer to 4.2%. While the fund's strategy aims to identify companies in a better position to maintain and grow their dividends, there's no guarantee that will happen, as fund payments can fluctuate, sometimes significantly, based on dividends received by the companies it holds. ETFs make it super easy to generate passive income. Many ETFs focus on holding income-producing investments, giving investors lots of options. The Schwab U.S. Dividend Equity ETF, iShares Preferred and Income Securities ETF, JPMorgan Equity Premium Income ETF, and Pacer Global Cash Cows Dividend ETF stand out for their attractive yields and potential for income growth. Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $656,825!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $865,550!* Now, it's worth noting Stock Advisor's total average return is 994% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Matt DiLallo has positions in JPMorgan Equity Premium Income ETF and Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. 4 Top Dividend ETFs Yielding Over 4% to Buy for Easy Passive Income was originally published by The Motley Fool
