With interest rates still quite low, some investors have been looking at high dividend yield stocks to provide regular income. The challenge with this approach is that these stocks might have a high dividend yield but not always the right underlying business fundamentals to protect and grow your capital.
Take Retail Food Group Limited (ASX: RFG) for example. It is a high dividend yield stock but shareholders have seen its share price drop 67% over the last year.
One way of addressing this issue might be to diversify through Exchange Traded Funds (ETFs) holding a number of high yield stocks. Here are three ETFs that you could look further into:
Vanguard Australian Shares High Yield ETF (ASX: VHY). This fund holds 43 ASX listed stocks with an average dividend yield of 5.7%. Top holdings in the fund include blue chip stocks such as Telstra Corporation Ltd (ASX: TLS), Westpac Banking Corp (ASX: WBC) and Wesfarmers Ltd (ASX: WES). I like the Vangaurd funds because they tend to have lower management fees compared to similar products. This fund has a management fee of 0.25% per annum.
SPDR S&P/ASX 200 Listed Property Fund (ASX: SLF). This fund invests in real estate stocks such as Scentre Group (ASX: SCG), Goodman Group (ASX: GMG) and Stockland Corporation Ltd (ASX: SGP). It has a dividend yield of 4.99%. The fund provides a good avenue to diversify and gain exposure to the real estate industry.
BETANASDAQ ETF UNITS (ASX: NDQ). This fund invests into large cap US stocks with technology being the dominant sector. Tech giants such as Apple, Microsoft, Amazon and Facebook are the the largest holdings within this fund. I like the overseas exposure that this fund provides and the additional growth potential in stocks such as Facebook. The downside however of this fund is that it has a lower distribution yield.
Where to invest $1,000 right now
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Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
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The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS, Retail Food Group Limited, Telstra Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended Scentre Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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