Monday, 5 January 2015

Review of London's High-Yield ETFs

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I'm always on the hunt for interesting Exchange Traded Funds (ETFs). Not just any, of course, but specifically high-yield (either based on dividends or debt/fixed-income) and preferably those leading to a geographically diversified portfolio. For a DIY Income Investor, the right choice of ETFs can be a big help. They can provide cost-effective diversification (and thus a measure of safety), simplify the running of your portfolio plus give easy access to dividend shares from around the world, in various currencies.
So here is an updated list...

What is slightly surprising to me (given the wealth of data available online) is that these high-yield ETFs are not so easy to find - there does not seem to be a comprehensive list that is ranked by yield. Topyields is one of the more useful sites for identifying high-yielders, including some ETFs - but it does not have a page specifically for the London market ETFs (and you should be aware that you may need to double-check some of the numbers that appear).

Even finding the yields from the ETF providers can be difficult, so I tend to rely on the data provided by Bloomberg or The FT. Having said that, you obviously need to know what ETF to look for - and therein lies the challenge.

So I've had to do it myself - but ETFs come in all shapes and sizes. For this post I have reviewed all my previous ETF suggestions and trawled through the list of ETFs quoted on the London Stock Exchange (LSE) published by The Financial Times and Morningstar, which seems to be comprehensive.

Sometimes there is a choice in the currency that the ETF is quoted in - I usually buy the Sterling (GBP or GBX=pence) one but you might want to diversify your currencies. All the ETFs follow a specific index and most are based on physical holdings (some are more 'synthetic'. using tools like 'swaps'). I have not included 'accumulation' ETFs, which roll up the income, as I see the portfolio income as an important mechanism for rejuvenating the portfolio itself.

I think that is quite an interesting collection and it might provide the basis for a well-diversified portfolio for the longer term. My own strategy is to buy the ETFs with the highest yields (within reason) and I like to keep a balance between high-yield dividend shares and high-yield bonds (or other fixed-income). Many experienced investors might see this as rather na├»ve - but it seems to have worked for me over the last few years...

But do make your own assessment.

To help you on your way (assuming you are interested in this corner of the investment world) here is an updated list of  high-yield dividend and fixed-income ETFs I have come across recently. I can't claim that it is comprehensive, so do let me know if I've missed any of your favourites. Currency is Sterling (GBP or GBX) unless shown otherwise (some ETFs have alternative currency versions). Current yields from the FT or Bloomberg are shown. (Note: Yields are as at the date of publication - they will change!)


 UK Dividend

iShares UK Dividend UCITS ETF IUKD - 4.55%. The 50 highest-yielding FTSE 350 stocks, excluding investment trusts, selected and weighted by one-year forecast dividend yield.

SPDR S&P UK Dividend Aristocrats ETF UKDV - 4.45%


UK Fixed-Income

ISXF: iShares Markit iBoxx £ Corporate Bond ex-Financials ETF ISXF - 3.80%. Sterling-denominated, investment-grade corporate bonds, issued by non-financial organisations, with a minimum remaining time to maturity of one year and a minimum amount outstanding of £100 million.


US Dividend

SPDR S&P US Dividend Aristocrats ETF USDV - 1.78% (USD version: UDVD). Not a very attractive yield!

US Fixed-Income

iShares $ High Yield Corporate Bond UCITS ETF SHYU - 5.62%

iShares $ Short Duration High Yield Corporate Bond UCITS ETF SDHG - 4.3% (USD version: SDHY)


Euroland Dividend

db x-trackers Euro Stoxx® Select Dividend 30 UCITS ETF 1D XD3E - 2.05%

iShares EURO STOXX Select Dividend 30 UCITS ETF IDVY - 3.87%

SPDR S&P Euro Dividend Aristocrats ETF EUDV - 3.61% (EUR version: EUDI)

Euroland Fixed-Income

iShares Euro High Yield Corporate Bond UCITS ETF SHYG - 5.3% (EUR version IHYG)


PIMCO Short-Term High Yield Corporate Bond Source ETF STHE (EUR) - 4.46%

PIMCO Short-Term High Yield Corporate Bond Index Source ETF SSHY - 4.41 (EUR version: STHY)

SPDR Barclays Euro High Yield Bond UCITS ETF JNKE (EUR) - 4.41%
 
Asia Pacific Dividend

iShares Asia Pacific Dividend UCITS ETF IAPD - 5.56% (USD version: IDAP)

db x-trackers MSCI AC Asia Ex Japan High Dividend Yield Index UCITS ETF 1D AHD/XAHG -  3.51% (USD version: N2F/XAHD)

SPDR S&P Pan Asia Dividend Aristocrats UCITS ETF PADV - 2.76%


Emerging Markets Dividend

iShares Emerging Markets Dividend UCITS ETF SEDY - Yield 5.03% (USD version:IEDY)

SPDR S&P Emerging Markets Dividend ETF EMDV - 4.79% (USD version:EDVD)


Emerging Markets Fixed-Income

iShares Emerging Markets Local Government Bond UCITS ETF SEML - 5.80%

SPDR Barclays Emerging Markets Local Bond UCITS ETF EMDD (USD) - 5.46%

iShares JP Morgan $ Emerging Markets Bond UCITS ETF IEMB (USD) - 4.69%

State Street SPDR BofA Merrill Lynch Emerging Markets Corporate Bond UCITS ETF EMCB (USD) - 3.68%.Tracks investment-grade and high-yield emerging market corporate debt


Global Dividend

db x-trackers Stoxx Global Select Dividend 100 UCITS ETF 1D XGDD - 4.04% (USD version: XGSD)

Vanguard FTSE All-World High Dividend Yield UCITS ETF VHYL - 3.79% (USD version:VHYD) Achieving worldwide diversification with an expense ratio of only 0.29% is quite a feat

SPDR S&P Global Dividend Aristocrats UCITS ETF GBDV - 3.52% (USD version:GLDV)


Global Fixed-Income

iShares Global High Yield Corp Bond UCITS ETF IGHY - 4.77% (USD version HYLD) Tracks the performance of the Markit iBoxx USD Liquid High Yield Capped Index

iShares Global High Yield Corp Bond GBP Hedged UCITS ETF GHYS - 5.18%



Update 4/4/15: Morningstar has a useful list of dividend income ETFs available on the LSE.


I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

7 comments:

  1. A nice summary, there's a couple in there I've not noticed before...thanks!

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  2. A handy round-up - thanks. You are right about yields though. Curious as well that the yield for the two Euro Stoxx Select Dividend ETFs should apparently be so different.

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  3. For Euroland Fixed Income, you may want to look at the SPDR version (JNKE). Slightly lower ter at 0.45%.

    Steve

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    1. Cheers Anon - I've added it to the list. The big question is: if the European Central Bank starts QE, then does this mean a boom in bond prices? I suspect, yes!

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  4. The offerings from WisdomTree, relatively new to Europe, are worth investigating.

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  5. Great article thanks. I would be interested in your ideas for a model portfolio/asset allocation based exclusively on the high yield ETFs you outlined in this article. For a 25 year old passive investor...

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    1. Thanks for that - good idea for an article!

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