3 "Forgotten" Dividend ETFs That Yield Over 5%

"While this can be a smart thing to do if you want a good yield for the short to medium term, it can end up bruising you badly if the stock market declines. These covered call ETFs cap your upside potential while mostly leaving you exposed to the downside. Thus, you're going to have a harder time recovering. During a market rally, they can put on an illusion of being a good deal since you get both upside exposure and the high yield."

"The PFF gives you exposure to preferred stocks. Preferreds are akin to a hybrid between stocks and bonds, meaning they offer a fixed yield and have a par value. These stocks are used by companies to raise more capital without resorting to diluting their existing common shareholders. Businesses prioritize commitments to preferred shareholders, and even if a dividend is missed, it accumulates and must be paid later."

"When you look into high-yield dividend ETFs, iShares Preferred and Income Securities ETF (NASDAQ:PFF), SonicShares Global Shipping ETF (NYSEARCA:BOAT), and ALPS REIT Dividend Dogs ETF (NYSEARCA:RDOG) likely aren't the first ones on your mind. This is because most fresh capital looking for a 5% yield is going into covered call ETFs. However, it's a good idea to look at some forgotten names if you want your compounding machine to last."

Most fresh capital seeking roughly 5% yields flows into covered-call ETFs, which cap upside while leaving downside exposure and can hinder recovery after market declines. Covered-call ETFs can appear attractive during rallies because they provide both upside exposure and high yield. Alternative high-yield ETFs include iShares Preferred and Income Securities ETF (PFF), SonicShares Global Shipping ETF (BOAT), and ALPS REIT Dividend Dogs ETF (RDOG). PFF holds preferred stocks that act as hybrids of stocks and bonds with fixed yields, par value, and seniority over common shareholders in bankruptcy. Preferred dividends accumulate if missed and often receive priority payment. PFF yields 6.12% with monthly distributions and carries a 0.45% expense ratio ($45 per $10,000), while sitting at a discount amid higher interest rates that could reverse with rate declines.

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