In 1989, we saw the first ETF, a fund based on the S & P 500 Index. The concept spread quickly to Index ETFs, and to stock, bonds and commodities. ETFs are similar to mutual funds but offer several advantages. They can be traded throughout the day at low cost and can be sold short, thus making them a vehicle for traders who buy and sell regularly. The ensuing years saw an explosion of ETFs that now cover every segment of the market and has spread worldwide covering most of the developed and emerging markets in North America, Europe and Asia. In recent years ETFs were added in Currencies and the newest innovation is the introduction of Inverse ETFs that move opposite a given stock or commodity. If this wasn’t enough, creators of ETFs have added a multiplier of 2X or 3X making the change in price double or triple the single ETF.
What many investors do not realize is that many ETFs pay dividends. The funds are usually made up of the best securities in a given group with many companies paying regular dividends. These dividends are passed through to the ETF investor. In this segment we will discuss some of the highest paying dividend ETFs with some of the results quite surprising.
Listed below are the highest dividend ETFs:
· FKO South Korea Alpha DEX Fund (FKO) Recent Price $26.76. This fund trades modified equal dollar weighted index stocks from the S & P South Korea BMI Index that generate positive Alpha relative to other stocks in the index. Dividend is $22.04. Annual dividend yield is 82.42%
· BZF Dreyfus Brazilian Real Fund (BZF) This fund category is Currency. It is not liked to a benchmark but does track the Brazilian Real BRL. Dividend is $5.73. Annual dividend yield is 30.34%. Since the fund is based on the Brazilian Real it does fluctuate with the ups and downs of that currency.
· MORL-ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (MORL). Category Real Estate. The fund is a capitalization- weighted index that tracks companies that derive at least 50% of their revenues from Mortgage REITS. Recent Price $19.82. Annual dividend is $4.43. Annual dividend yield is 22.53%.
· EWSS-iShares MSCI Singapore Small Cap ETF (EWSS). This fund tracks the MSCI Singapore Small Cap Index in the bottom 14% of equity capitalization in Singapore. Recent Price $29.27. Annual Dividend $5.90. Annual dividend yield 19.27%.
· TMV Daily 20 Year Plus Treasury Bear 3X Shares (TMV). This fund tracks the total returns of the long term 20 year and greater maturity range of the US Treasury Bond Market. Recent Price $68.62, Dividend $7.35. Annual dividend yield 18.33%.
· DBBR-MSCI Brazil Hedge Equity Fund (DBBR). This fund gives exposure to the Brazilian equity markets while at the same time mitigating fluctuations between the US Dollar and the Brazilian Real. Recent Price $17.42. Dividend $2.69. Annual dividend yield 15.32%.
· REM-iShares Mortgage Real Estate Capped ETF. (REM). The Index tracks performance of residential and commercial real estate, mortgage finances, and savings associations sectors of the US equity market. Recent Price $11.96. Annual Dividend $1.84. Annual dividend yield 15.25%.
Notice that these ETFs cover a diversity of securities and sectors throughout the US and the world. The high dividend yields do come with some risk.
The above discussion is neither a recommendation to buy nor to sell the above securities. You must always do your own diligent research.