Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you're looking for a significant income stream from your portfolio, the Guggenheim Multi-Asset Income ETF (NYSE: CVY ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously. Offering a mix of bonds, real estate investment trusts, common stocks, preferred stocks, and more, it recently sported a dividend yield above 5%.
ETFs often sport lower expense ratios than their mutual fund cousins. The Guggenheim ETF's expense ratio -- its annual fee -- is 78%. That's higher than many ETFs, but lower than a typical stock mutual fund.
This ETF has performed rather well, outperforming the S&P 500 over the past three and five years, even though it contains assets other than stocks, which tend to grow more slowly. (It's still mostly in stocks, though, with about 71% of assets in U.S. stocks and 17% in foreign ones.) As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
What's in it?
Plenty of income-generating stocks had strong performances over the past year. Hard-drive titan Seagate Technology (NYSE: STX ) , for example, surged a huge 172%, and that's after it shed 10% following a disappointing earnings report. Its recent past was glorious in part because it was able to charge high prices following flooding in Thailand, when the industry was disrupted. The company has been expanding its solid-state memory business, but some bears worry that the PC market isn't too strong these days, which could hurt Seagate. The stock recently yielded 4.1%.
Terra Nitrogen (NYSE: TNH ) , recently yielding 7%, jumped 57%, partly due to a warm winter bringing an early planting season, as well as growing demand for nitrogen from emerging markets seeking greater crops. In its second quarter, revenue sagged a bit, due to lower sales and pricing for ammonia. Profit margins tower over those of competitors, though. Remember that it's a master limited partnership, though, which means a bit more complication come tax time.
Other companies didn't do as well last year, but they could see their fortunes change in the coming years. Canadian oil and gas exploration and development company Enerplus (NYSE: ERF ) , for example, shed 41%. Recently yielding 7.7%, it has been suffering from very low natural gas prices, while adding to the oversupply problem by producing more gas. Fortunately, though, it's also operating in oil-rich regions and has been boosting its higher-margin activities there. It does carry significant debt and hasn't been cash-flow-positive lately, but many, such as Wall Street analysts, are still bullish on it.
Oil pipeline and storage specialist Buckeye Partners LP (NYSE: BPL ) , also a master limited partnership and down about 5%, has also been yielding about 7.7%. Its very steep payout ratio and sizable debt, though, suggest that the dividend may not grow rapidly or may even be reduced. The company has been seeing revenue and earnings explode recently and bought a New York harbor terminal from Chevron to better facilitate its oil transportation.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from them that much easier.
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