Author: Raphaël Mennicken CFA, Chief Investment Officer of Covestor
Updated on May 18, 2011
There are very few certainties about investments in 2011. However, one fact seems pretty much certain: U.S. dollar-based investors should not look to government bonds – or even corporate bonds – to provide significant yield and income. Market expectations (as reflected in Futures and forwards price) are that the Fed Funds Rate will not be raised until 2012.
Given that the yield on the S&P 500 as of April 11 is roughly 2% and that interest rates are likely to remain at historical lows, where can investors find some decent yield?
The answer is simple: don’t invest in run-of-the-mill U.S. stocks, or if you do, make sure you focus on total yield and don’t constrain yourself to a portfolio that is too close to a benchmark. This is what a few model managers on Covestor’s platform do.
I’ll highlight a small selection now, but if you look carefully at other models, you will notice that quite a few have a yield target.
• Finding yield in US listed stocks, ETFs, and Closed-End Funds: Dividend and Income Plus managed by 401 Advisor. The target yield for this model is 8%, and currently the indicative yield is 7.48%.*
• Finding yield in stocks, REITs, and Closed-End Funds: Athena Dividend Income. Currently, the indicative yield is 8.46%.*
• Finding yield in international preferred shares, ETFs and Closed-End Funds: International Yield managed by Vivian Lewis. The target yield for this model is 5%, and currently the indicative yield is 5.11%.*
• Finding yield in Master Limited Partnerships (MLPs): MLP Direct Ownership managed by Dan Plettner. The target yield for this model is 6-7%, and currently the indicative yield is 6.08%.*
*Note: All yield as at end of day May 10, 2011. Indicative yield is calculated the last known dividend, divided by the current price, and is shown annualized. It is therefore sensitive to price movements and does not represent a promise of income or total return over the next 12 months. Raw data was obtained from Bloomberg, calculations by Covestor.
