Many retirees and other income investors are experiencing the same problem. They just can’t get enough yield from bonds, GICs, and other traditional sources of income.
Some of these folks have turned to the stock market in an attempt to get more income. Sure, individual high-yielding securities might be dangerous, but a portfolio filled with such stocks is pretty likely to maintain an attractive payout.
ETF providers have caught onto this trend, providing monthly income ETFs.
One of the largest in Canada is the iShares Diversified Monthly Income ETF (TSX:XTR), which has a market cap of $621 million and a monthly dividend of a nickel per share, which is 5.6%. It offers plenty of liquidity for retail investors too, with an average daily volume of about 32,000 shares.
XTR is a fund of funds, meaning its holdings comprise of other ETFs. Its two largest holdings are high-yield bond ETFs, making up approximately 35% of assets. Other top holdings include ETFs that own dividend growth stocks, corporate bonds, and high-yielding Canadian stocks.
In total, 70% of assets are invested in Canada, 26% in the United States, and 4% in other countries. Asset allocation is approximately 56% in fixed income and 44% in equities.
While the management fee of 0.55% is high compared to some other Canadian ETFs, it’s still much lower than the average balanced mutual fund, which is this ETF’s main competition.
Overall, the Diversified Income ETF is a decent choice for investors looking for income and not a whole lot of growth.
