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08/12/2013 9:00 am EST
This ETF holds debt issued by electric, pipeline, gas distribution, and water companies, notes David Dittman, who has added the ETF to the Income Portfolio at his Utility Forecaster.
The iShares Utilities Sector Bond ETF (AMPS) hit its closing high of $54.07 on April 29, 2013. The decline from there—about 10%—was driven largely by fear about rising interest rates, after US Federal Reserve Chairman Ben Bernanke started talking about “tapering” the central bank's bond-buying program.
Though it will die someday, the end of quantitative easing has been greatly exaggerated.
And Mr. Bernanke has reiterated the Fed's commitment to “accommodative” monetary policy for the foreseeable future, including the current “zero-bound” level for the fed funds rate.
Market rates will be driven by other factors of course, including strengthening economic growth. But the fixed-income securities in this ETF will support a solid 3.5% yield.
Currency exposure in the fund includes the US dollar (approximately 93%), the Canadian dollar (5%), and the British pound (2%).
The average maturity is approximately seven years, and the average credit rating is BBB, or low investment-grade. The ETF employs no leverage. The expense ratio is 0.3%.
The fund's market value is relatively small at about $10 million. And it has a short trading history, having debuted just 18 months ago.
But the portfolio includes high-quality companies and is broadly diversified. Meanwhile, no single holding accounts for more than 2.78% of total assets. iShares Utilities Sector Bond Fund is a buy under $52.
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