High-income sources in a low-interest-rate world
About Nicholas Vardy
Nicholas A. Vardy is Chief Investment Officer at Global Guru
Capital, a fee-only, SEC-registered investment-advisory firm where he
manages money for high-net-worth clients. Vardy is also the editor of three
investing and trading services at NicholasVardy.com. He appears regularly on the Fox Business
Network and CNBC Asia, and is a highly-rated speaker at investment conferences
around the globe.
Nicholas regularly contributes his market views on his company blog. You can also follow Nicholas on Twitter @NickVardy or email him at nvardy@globalgurucapital.com.
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Nicholas regularly contributes his market views on his company blog. You can also follow Nicholas on Twitter @NickVardy or email him at nvardy@globalgurucapital.com.
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Nicholas Vardy's latest posts
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By Nicholas A. Vardy, CFA
For income investors, cash flow is king. And few things are more
satisfying than to hear the metaphorical cash register ring month after month,
quarter after quarter. But in the current environment in which the government
continues to keep interest rates suppressed, is there a place an
investor can go to find better yield? There are possibilities. But first, some
background.
Keeping a nice steady pace of investment income has been tough to achieve in
the low-interest-rate environment brought on by the Fed's Zero-Interest-Rate
Policy (ZIRP). To add insult to injury, Ben Bernanke's "tapering" speech on May 22 saw the bottom drop out of almost all income investments, as the prospects of higher interest rates now loomed on the horizon.
Both U.S and foreign fixed-income investments, as well as U.S. mortgage real-estate investment trusts (REITs) were particularly hard hit.
But it's important to remember that income investing is about more than just investing in bonds and REITs, whose prospects are most closely linked to the Fed's interest-rate policies.
Awash in cash, many companies in the U.S. and abroad are paying out higher dividends than ever before. A broad definition of this group also includes the alphabet soup of high-yielding multi-level partnerships and business-development companies.
Finally, as option traders know, you can generate steady income by selling options through time-tested covered-call strategies.
Additionally, there are a number of exchange-traded funds (ETFs) that represent diverse sources of steady monthly and quarterly income.
And despite the uncertainty unleashed by Ben Bernanke when he introduced the word "tapering" into the global financial lexicon, several of these ETFs have generated high single- or even double-digit percentage gains so far in 2013.
Here are three strategies I am currently invested in on behalf of clients:
1. High-dividend income
Global X SuperDividend ETF
The Global X SuperDividend ETF /quotes/zigman/5374181/delayed/quotes/nls/sdiv SDIV -1.05% tracks the Solactive Global SuperDividend Index, which tracks the performance of 100 equally weighted companies that rank among the highest-dividend-yielding-equity securities in the world.
In fund speak, "global" doesn't mean "foreign." In fact, SDIV has about one-third of its investments in U.S. stocks. The remainder is invested in high-yielding stocks in Europe, Australia, Asia, Canada and Latin America.
In terms of sectors, it's no surprise that SDIV focuses on the "big four" of dividend investing — real estate, financial services, telecommunication and utilities.
SDIV yields an impressive 7.87%, pays dividends monthly and charges a fee of 0.58% annually.
SDIV has risen 8.91% so far this year, and, with dividends, it has generated a total return of 15.21% year to date.
/quotes/zigman/5374181/delayed/quotes/nls/sdiv
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