6 Overlooked High-Yielding ETFs In Focus Post Fed Minutes

The latest Fed minutes from Mar 3 & 15 meeting reaffirmed concerns related to the economic damage inflicted by the deadly coronavirus. In light of this, the central bank will keep interest rates near zero until the economy has ‘weathered’ coronavirus impact and is on track to achieve the maximum employment and price stability goals.

The Fed officials predict two plausible scenarios for the U.S. economy, which is grappling with the coronavirus outbreak. The U.S. economy will start to recover in the second half of the year in one scenario while in the worst-case scenario there will be a recession with no significant rebound until next year.

The current situation has forced investors to look elsewhere in the ETF space for their current income. As such, they are showing great interest in products that pay outsized yields irrespective of the segments.

Why High Yield?

High yield ETFs play a defensive role in a portfolio and can reduce volatility in turbulent times. These products provide greater stability and safety, thanks to their strong cash flow streams. While U.S. dividend ETFs have been always popular in this space, yield-hungry investors often overlook the products that do not include the top dividend-paying companies but still offer robust yields. Some of these funds could be illiquid and might not participate in the global stock rally but offer outsized payouts or sizable yields on a regular basis.

Below, we have highlighted some ETFs with double-digit yields that could be the perfect choice for investors seeking higher income in the low rate environment while protecting the downside risk from market uncertainty. The yield on these products are clearly crushing the broad dividend space and the high yield bond world by wide margins.

iShares Mortgage Real Estate ETF (REM - Free Report) – Yield: 23.3%

This is the most popular mortgage REIT ETF with AUM of $644.7 billion and average daily volume of 651,000 shares. It offers exposure to the U.S. residential and commercial mortgage real estate sectors by tracking the FTSE Nareit All Mortgage Capped Index. It holds 36 stocks in its basket and charges investors 48 bps a year in fees and has a Zacks ETF Rank #4 (Sell) with a Medium risk outlook.

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