Despite calls for higher interest rates ahead, some are concerned that we might be stuck in an extended low-yield environment. Nevertheless, income-minded investors may look to a few high-yield exchange traded fund strategies to generate cash.
For example, the InfraCap REIT Preferred ETF (NYSEArca: PFFR) can be extremely attractive for investors looking for income in a yield-stretched market. PFFR has a 0.45% expense ratio and shows a 6.39% 12-month yield.
The REIT Preferred ETF is comprised of preferred securities listed on U.S. exchanges that are issued by REITs.
Preferred stocks are a type of hybrid security that show bond- and equity-like characteristics. The shares are issued by financial institutions, utilities and telecom companies, among others. Within the securities hierarchy, preferreds are senior to common stocks but junior to corporate bonds. While preferred securities represent ownership interest in a company, preferred stockholders usually have no voting rights with respect to corporate matters of the issuer, but preferred securities have rights and characteristics similar to debt instruments. Additionally, preferred stocks issue dividends on a regular basis, but investors don’t usually enjoy capital appreciation on par with common shares.
Real estate investment trusts or REITs are securities that trade like a stock and invest in real estate directly through property ownership or mortgages. Consequently, revenue are mainly generated through rents or interest on mortgage loans. To qualify for special tax considerations, the asset also distributes the majority of income, about 90% of taxable profits, to investors as dividends, and receive at least 75% of that income from rents, mortgages and sales of property.
Additionally, the actively managed InfraCap MLP ETF (NYSEArca: AMZA) can also help investors gain a pure play exposure to master limited partnerships. The fund invests in midstream MLPs that are principally involved in the gathering, processing, transportation, and storage of crude oil, natural gas, natural gas liquids, and refined products. AMZA has a 1.93% expense ratio and a 18.94% distribution rate as of April 5.
MLPs don’t make their money based on oil or gas prices. Unlike other energy sector stocks, MLPs primarily deal with the distribution and storage of energy products, so their business model is less reliant on the commodities market since MLPs profit off the quantity of oil and natural gas they are able to move around.
To qualify as an MLP, the companies pass through at least 90% of their income to investors, making the assets an attractive yield-generating investment.
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