Hi Paul - Not too sure where the best place is to find yield but these ETF Dividend Funds have been losers. There are a lot of cross current w/ weak US$ vs strong US$, low interest rates vs expectations of rising rates, and the threat of long term inflation.
ETF Dividend Funds - Not so good performance
One Investment to Avoid in Today's Market
fool.com
From the article:"...So far in 2009, 74 S&P 500 companies cut their dividends, eliminating an additional $48 billion in annual payouts. Two of the recent reductions came from Sunoco (NYSE: SUN) and SUPERVALU (NYSE: SVU). All told, Standard & Poor's expects S&P 500 dividends to decline some 36% this year -- the worst decline since 1938.
Needless to say, these massive dividend cuts have hurt WisdomTree's dividend-weighted strategy. As of Sept. 30, none of the six domestic dividend exchange-traded funds had outperformed the S&P 500 since their respective inception dates.
In fact, the worst-performing WisdomTree domestic dividend ETF has been the High-Yielding Equity Fund (DHS) -- or, as it was curiously but unsurprisingly renamed in March, the Equity Income Index. Whatever name it goes by, this dividend-weighted ETF is down 30% since its inception in 2006, much worse than the 12% lost by the S&P over the same period.
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For 8% though, if I'm doing that, I'm figuring, rather than risk NYB I will get the 8% plus or minus, with a diversified etf and/or bond fund.
My worry on an ETF Bond fund is with rising rates, the NAV of the ETF will fall. Can one exit before everybody else wants out? The ETF Dividend Funds have been losers too. I am chasing yield but also trying to focus on value (company net tangible assets). I sold my ETF XLF holdings and NYB is the only financial I own. It's not the best "hold" but if rates rise, I do not think it will fall. There is specific stock risk with NYB but my total portfolio exposure is only 3%. The bond fund I own is the Vanguard GNMA (VFIXX)(11% portfolio exposure) but I am no longer reinvesting the dividends.
I am thinking of trimming down the VFIXX and other specific stocks that may be impacted by the pending interest rate hikes and moving the money into a fund like TPZ. My thinking is that the underlining assets (and revenue streams) are not as susceptible to higher interest rates. Maybe a utility ETF fund might be something to consider. Have you looked at any of these?
This is a difficult transition as the FED will not make their first move for some time (maybe 12-18 months) as the economy is too fragile. Yet, if you wait for the first bump higher in interest rates, many of these bond funds will have sold off and it may be difficult to find a place to park money for "yield" w/o losing NAV.
I am not too sure how to position the portfolio for this move other than holding equities that generate consistent revenue streams (from several sources), have pricing power (to hedge against inflation) and own underlining assets or technology that can be bought at a discount.
EKS |
