Investors should be cautious about chasing high yields, as it could lead to significant risks if not properly analyzed. While some high-yield stocks and ETFs exist, it's important to evaluate their financial health before investing. The Alerian MLP ETF (AMLP) stands out by offering an attractive 8% yield alongside strong capital gains. This combination of stability and growth makes it appealing for investors seeking passive income without excessive risk, especially in the context of midstream energy operators.
Many investors are aware of the dangers of chasing returns. Buying a stock or ETF based purely on raw momentum could lead to quick losses once the direction inevitably turns a corner.
Though I'm not against scrapping the so-called '4% rule' by going for higher yielders, I do think that most investors who blindly chase yield could find themselves taking on far more risk than they can handle.
At the end of the day, dividend stability is key for those who want to go for the 8% yielders over the 4% yielders.
AMLP is an intriguing 8% yielder that's also delivered strong gains for investors of late.
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