Money

Three Income Investments Shooting the Lights Out in 2016

If there’s one thing investors are searching for in 2016, it is income.

Sure, the stock market is having a positive year, with the S&P 500 eking out a gain of 7.68% year to date.

However, with returns flat since the post-Brexit vote bounce and the S&P 500 trading where it first did on July 13, the market’s returns have an air of stagnation about them.

There is, however, one factor that has driven the price of some assets across the globe higher. And that is the payment of income on a regular basis.

In a zero-interest-rate world, investors have to expand their investment horizons in terms of where they put their money to work if they want to hear the metaphorical cash register ring each month or quarter.

Now, I am completely agnostic when I look at income-generating investments.

That is why I follow income-producing investments across a wide range of sectors and strategies. These include everything from U.S. Real Estate Investment Trusts (REITs), to Business Development Companies (BDCs), to Exchange-Traded Fund (ETF) strategies that generate steady income by selling calls against the S&P 500.

Money is money, and I am as indifferent to its source as is my brokerage account.

With that, here are the three top performers among the income-generating investments that I regularly track — though, perhaps sadly, I am not invested in any of them myself.

1. iShares Emerging Markets Dividend ETF (DVYE) — up 25.65%

Although emerging markets do not get much press these days, this hated asset class is having one of its better years in recent memory, with the MSCI Emerging Markets Index up 19.34% year to date. So perhaps it is not surprising that iShares Emerging Markets Dividend ETF (DVYE) is the top performer among the dozens of income generating strategies I track.

Specifically, the iShares Emerging Markets Dividend ETF tracks the Dow Jones Emerging Markets Select Dividend Index — a dividend-weighted index of high-dividend-paying emerging markets companies.

Unlike emerging markets ETFs that track large-cap companies in market-cap-weighted indexes, DVYE’s focus is far narrower, holding 100 of the highest-yielding stocks from emerging markets.

By selecting and weighting companies based on dividend yield, mid- and small-cap companies end up making up most of the fund. This results in underweighting energy and financials and in overweighting dividend-paying utilities. In terms of countries, DVYE also underweights Russia and China, and instead overweights Taiwan and Brazil.

DVYE’s expense ratio is on the high side at 0.49%. It currently yields a solid 4.61%, paying dividends on a quarterly basis. With assets of close to $260 million, this ETF is unlikely to disappear any time soon.

To read about my other two recommendations and the rest of the article, click here.


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