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High Income ETFs Worth Their High Costs

With negative interest rates dominating international headlines and the benchmark 10-year U.S. Treasury yields slipping to below 2%, there is huge demand for income ETFs. Yield-hungry investors have rushed to high-dividend securities and ETFs in search of steady current income. Global growth continues to flounder, and the Fed is in no mood to hike rates frequently this year, suggesting continued outperformance by dividend ETFs. That being said, we would like to note that current income turns futile if you end up paying high expenses for a high-dividend or high income ETF. After all, everybody wants value for money. Also, cheaper funds have the potential to outperform the pricey choices. Keeping capital gains or losses constant and considering an expense ratio of 1%, a fund of $10,000 invested at 8% annual dividend will grow to $19,672 in 10 years, while the same fund invested at an expense ratio of 0.1% will grow to a higher amount of $21,390. But there are a few high income ETFs that can be intriguing picks despite the high costs associated with them. These ETFs have given decent performances so far this year (as of April 15, 2016), overruling the heightened volatility in the market. Also, since these have offered solid yields, their high costs do not hurt investors. Below, we highlight a few of such high dividend ETFs that are worth their high expense ratios. YieldShares High Income ETF (NYSEARCA: YYY ) The fund seeks to provide the performance of the ISE High Income Index. This $81.5 million fund definitely has a high expense ratio of 1.82%, but yields a stupendous 10.71% annually. The fund holds 30 closed-end funds ranked the highest overall by the ISE on the basis of three criteria, namely fund yield, discount to net asset value and liquidity. Around 66% of the fund is targeted at debt securities, while the rest are in equities. The fund is up 2.5% so far this year (as of April 15, 2016). Though the capital gains here are not solid, a 10.71% yield makes up for feeble market performance. AdvisorShares Athena High Dividend ETF (NYSEARCA: DIVI ) This $7.4 million actively managed ETF offers dividend yield of about 4.05% and has an expense ratio of 1.30%. The fund is heavy on North America (55%), followed by emerging Asia (16%) and developing Asia (6%). None of the stocks accounts for more than 4.36% of the portfolio. The fund is up 10.7% so far this year (as of April 15, 2016) – a sturdy performance which makes its dividend-adjusted return sturdier. Guggenheim S&P Global Dividend Opportunities Index ETF (NYSEARCA: LVL ) This ETF follows the S&P Global Dividend Opportunities Index, which focuses on high-yielding securities worldwide. As many as 109 securities are chosen from around the world for inclusion, with heavy exposure going toward finance (26.36%), utilities (22.21%), telecom (16.3%) and energy (12.88%) securities. Australian, American and British stocks account for about 20.6%, 17.1% and 15%, respectively, of total assets. This $52 million fund charges 65 bps in fees. It yields 6.06% annually (as of April 15, 2016) and is up 8.3% so far this year (as of April 15, 2016). First Trust Dow Jones Global Select Dividend Index ETF (NYSEARCA: FGD ) This $352 million fund provides exposure to the 100 high-yielding stocks. None of the securities accounts for more than 1.73% of the assets. From a sector look, financials takes the top spot at 34.33%, while energy, telecom, industrials, consumer discretionary and utilities round off the next five spots with double-digit exposure each. About half of the portfolio is tilted toward large- cap stocks, while mid caps and small caps take the remainder. In terms of country profile, Australia, U.S., Canada and United Kingdom occupy the top four positions. The fund yields 5.16% annually, while its expense ratio comes in at 0.58%. Agreed, an expense ratio of 0.58% is not too steep, but it is way higher than many high dividend ETFs like Vanguard High Dividend Yield ETF (NYSEARCA: VYM ), which charge just 10 bps in fees. The fund is up 5.3% so far this year (as of April 15, 2016). SPDR Income Allocation ETF (NYSEARCA: INKM ) INKM is an actively managed fund of funds that seeks to provide total return by focusing on investment in income and yield-generating assets. The ETF primarily invests in SPDR ETFs, but also includes other exchange-traded products. Investment-grade bonds (31.5%) and equity (27.6%) occupy the top two spots in the portfolio. The expense ratio is 70 basis points, while it yields about 4.13% annually. The fund is up 3.3% so far this year (as of April 15, 2016). Original Post

4 Sector ETFs Jump To Top Ranks As Q1 Earnings Hit

By now, we are all aware of the fact that the Q1 earnings season, which has just taken off, is going to be a soft one. Earnings of the S&P 500 index are likely to decline 10.3% in the first quarter while revenues are expected to fall 0.6% as per Zacks Earnings Trends issued on April 14, 2016. The key drag was the energy sector as evident from the 5.2% expected Q1 earnings decline from the ex-oil S&P 500 index, Revenues enter the growth territory (up 2.4%) if we rule out the energy sector weakness from the S&P 500. Notably, the energy sector is expected to report a 105.8% decline in earnings for Q1 on 29.8% lower revenues. But then, the other 15 sectors constituting the S&P 500 index (as per Zacks methodology) are not sturdy enough. Only six sectors will likely post mild-to-positive earnings growth this season with acute recessionary impact expected in basic materials (down 23.8%), industrial products (down 25.7%) and conglomerates (down 23.7%). Needless to say, stocks and the related ETFs will come under pressure post earnings releases of such sectors. Investors might be at a loss as to where to bet their money to reap the return of a bull market, without being perturbed by earnings weakness. For them, below are four sector ETFs that have soared to the top Zacks Ranks (#1 or #2) at the threshold of the earnings season (read: Winning ETF Strategies for Q2 ). Guggenheim S&P 500 Equal Weight Technology ETF (NYSEARCA: RYT ) – #2 (Buy) to #1 (Strong Buy) Technology ETFs were badly hit in the first quarter of 2016, having returned minutely or posting massive losses as risk-off sentiments loomed large. However, things took a turn for the better lately as a flurry of upbeat U.S. economic data and a dovish Fed whet investors’ risk appetite. The sector is expected to post 6.7% decline in earnings on 2.6% revenue growth. So, investors intending a momentum play in the tech space can bet on RYT which is an equal-weighted version of the S&P 500 Information Technology Index and gives exposure to a broader technology sector. RYT has a Medium risk outlook. Guggenheim S&P Equal Weight Health Care ETF (NYSEARCA: RYH ) – #3 (Hold) to #1 The scenario was almost the same for the broader healthcare sector which returned to health recently. A biotech rebound, compelling valuation, increasing merger and acquisition activities and several important product approvals act as tailwinds to the sector. The broader medical sector is projected to post 0.9% growth in earnings in Q1 on bumper 9.1% higher revenues. No points for guessing why investors should target this space right now. An intriguing bet on this sector is RYH which is an unmanaged equal-weighted version of the S&P 500 Health Care Index. RYH has a Medium risk outlook. Market Vectors Gaming ETF (NYSEARCA: BJK ) – #3 to #1 This gaming sector falls into the consumer discretionary category, which should be on a smooth road ahead on compelling valuation, expectations of a longer low-rate environment due to a dovish Fed and a softer dollar driving earnings of companies with considerable exposure in foreign lands. The consumer discretionary space looks better placed than many other sectors for the first-quarter earnings season. The sector is likely to record 1.8% earnings growth on 5.8% growth in revenues. The fund, BJK, gives investors exposure to the overall performance of the largest and most liquid companies in the global gaming industry. From a country look, U.S. takes the top spot at 34.0% while Australia and China round off the top three with a double-digit exposure each. IQ US Real Estate Small Cap ETF (NYSEARCA: ROOF ) – #3 to #2 As the U.S. Treasury bond yields are hovering at lower levels despite a slowly improving economy, the outlook for real estate is looking up. The sector performs well in a low-yield environment while a growing economy ensures demand for real estates. Investors can bet on this trend via ROOF which is made up of small-cap stocks – the best capitalization to play the recovering domestic economy. Plus, ROOF yields about 5.80% annually (as of April 14, 2016) and can act as a decent income destination for investors. Link to the original post on Zacks.com