Fabian's Favorites: Go-to Income ETFs

11/18/2015 9:00 am EST

Focus: ETFs

Doug Fabian

Editor, Successful ETF Investing, ETF Trader's Edge, Weekly ETF Report, and ETFU.com

Our Fabian Domestic Plan buy signal—our proprietary long-term timing indicator—allowed us to do what we’ve been wanting to do for some time, add a variety of dividend and high yield exposure to the Income Portfolio, explains Doug Fabian, editor of Successful ETF Investing.

We accomplished this with three fantastic funds that I want all Income Portfolio investors to add to their current mix.

On the dividend-paying equity front, we bought iShares Select Dividend ETF (DVY), which is our go-to fund for large-cap dividend stock exposure.

This fund holds dividend powerhouses such as Lockheed Martin (LMT), Philip Morris (PM), and McDonald’s (MCD), to name just a few.

On the preferred front, we have the iShares US Preferred Stock ETF (PFF), my favorite exchange-traded fund (ETF) to get preferred-stock exposure.

Companies, primarily in the financial space, that issue high-yield preferred stocks are in this fund.

Such holdings are what give PFF its big annual yield of 6.17%. Finally, there’s the iShares US Real Estate ETF (IYR), our go-to fund for real estate investment trust (REIT) exposure.

REITs are structured as pass-through securities and that means they pass through most of their earnings to shareholders. For income investors, it means a yield on IYR of 3.94%.

The mix of high-quality dividend-paying stocks in DVY, high-yield preferreds in PFF and high-yield pass-throughs in IYR reflect the kind of well-rounded income-generating securities that need to be in your portfolio if you want to generate strong yields and solid price appreciation.

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