Blackrock Bets for Steady Income

12/30/2016 9:00 am EST

Focus: ETFs

David Fabian

Managing Partner, FMD Capital Management

Retired investors are often looking for core exposure in funds that demonstrate low costs and steady income, explains fund expert David Fabian, editor of The Flexible Growth & Income Report.

One fund company that offers several different options in this arena is the iShares suite of ETFs from BlackRock. Here’s three top BlackRock ETFs for steady retirement income.

iShares Core High Dividend ETF (HDV)

I have held HDV as a core holding for well over a year now and it continues to be a standout performer. 

This ETF owns a diversified portfolio of 75 U.S. stocks that pay high dividend yields; its index criteria skews the majority of the weighting towards large-cap stocks. 
The dividend stocks in this fund combine to produce a current 30-day SEC yield of 3.57% and income is paid quarterly to shareholders. 

HDV is the type of holding that can be used to maintain correlation with the stock market, while collecting an above-average income stream. The ETF has a very minimal expense ratio of 0.08%, which makes it suitable as a long-term core holding. 

iShares Core Dividend Growth ETF (DGRO)

An excellent broad-market supplement to HDV is DGRO, which focuses on companies with a consecutive history of growing their dividends. 

This makes for an attractive fundamental tailwind and commitment to returning business gains to shareholders. The fund currently sports a 30-day SEC yield of 2.59% and income is paid quarterly to shareholders.

This ETF is also a core holding in my newsletter and continues to provide broadly diversified exposure to high quality stocks in a single low-cost vehicle. 

DGRO charges a similar expense ratio of just 0.08% annually and has nearly $1 billion in total assets.

iShares Conservative Allocation ETF (AOK)

In my experience, retirees tend to shift their risk tolerance down a few notches as they begin to realize there is less time to make up for any egregious mistakes. 

One way to do that is to consider a low-cost, multi-asset fund with a conservative mandate. AOK is designed as a 70/30 allocation of bonds and stocks that includes both domestic and foreign exposure. 

This “fund of funds” style ETF is made up of other iShares portfolios with a total net expense ratio of 0.25%. Income is paid monthly and the current 30-day SEC yield is listed at 2.53%.

Conservative investing isn’t sexy, but this ETF allows you to participate in an extremely diversified portfolio at a very minimal expense. 

One note of caution is that the overweight nature of the bonds in this portfolio does skew the risk needle towards the direction of interest rates. Nevertheless, the historical price fluctuations have been far more muted than a stock-only holding.

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