Top 10 Highest Yielding ETFs

February 10, 2017

With interest rates up from their record lows of 2016, the search for yield among investors isn't as intense as it was last year. Still, with rates at historically low levels even now, there's plenty of demand for high-yielding products.

In the ETF world, issuers have been more than happy to meet that investor demand by launching numerous products designed to generate high yields. Some of these offerings are sound and are worthy of consideration by income-hungry investors.

Others are questionable offerings that are best left untouched by most investors. The highest-yielding ETFs in particular often provide poor total returns, with declines in shares prices offsetting the sizable distributions―but not always.

In this article, we'll discuss the good and the bad as we lay out the current 10 highest-yielding ETFs on the market. We've excluded products that made large one-time distributions recently and instead include only those that have paid large distributions more consistently.

MLPs

The InfraCap MLP ETF (AMZA) is one of several products focused on master limited partnerships (MLPs) on this list. AMZA is an actively managed fund that primarily holds energy infrastructure companies that use the tax-advantaged MLP structure.

Energy MLPs are known for their strong cash flows and high yields. There are three main types of MLP ETFs, which you can read about here. AMZA is considered a C-corporation, which means taxes on most of the fund's distributions are deferred until an investor sells.

Those distributions are hefty. The 12-month yield for the ETF is 18.5%. That's well above the 7.3% yield for the competing Alerian MLP ETF (AMLP), the largest ETF in the segment, with nearly $11 billion in assets.

Despite the higher yield, the actively managed AMZA has underperformed its competitor on a total return basis since its inception. In the period from October 2014 through today, the fund had a loss of 36% compared with a loss of 16.4% for AMLP.

Total Return For AMZA & AMLP Since October 2014

 

 

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