Author: Raphaël Mennicken CFA, Chief Investment Officer of Covestor
September 14, 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 still that the Fed Funds Rate will not be raised until late 2012 at the earliest.
Given that the dividend yield on the S&P 500 is currently just over 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. Click through for details on these portfolios:
- 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 7.67%.* Recent blog post from 401’s Bill DeShurko: It doesn’t matter what Obama or Bernanke say tonight (9/8)
- Finding yield in stocks, REITs, and Closed-End Funds: Athena Dividend Income by AthenaInvest. Currently, the indicative yield is 10.24%.*
- 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 9.23%.* Recent blog post from Vivian Lewis: Good reasons for going international (9/12)
- 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 6.81%.*
*Note: All yield as of end of day September 12, 2011. Indicative yield is calculated based on the last known dividend, divided by the current price, and is shown annualized. For preferred shares, the yield to maturity is used. Yield is therefore sensitive to price movements and does not represent a promise of income or total return over the next 12 months. The yield for a model is the weighted average of the yield of each position in the model, including cash, and taking into account long and short positions. Raw data obtained from Bloomberg, calculations by Covestor.
