Have clients nearing retirement? Nearing retirement yourself? The shifting market landscape amid a potential soft landing is appealing, but potential dislocations loom. At the same time, the fixed income landscape may also be shifting in important ways, meaning assets need reallocation. Income ETFs could be the solution for these developing quandaries.
See more: Fidelity Slashes Price on Its Active High Yield ETF
Income ETFs combine the tax advantages of the ETF wrapper with a focus on income-producing securities. Though they often focus on fixed income, some target equity sectors offer exposure to dividend-heavy securities. These funds can prove to be useful tools for RIAs.
Income ETFs to Watch
The Fidelity MSCI Utilities Index ETF (FUTY ), for example, focuses on equities but also offers an appealing distribution yield. FUTY charges an eight basis point (bps) fee to track the MSCI USA IMI Utilities 25/50 Index. The fund’s 2.7% distribution yield, per Fidelity Investments data, may be due to its focus on utilities, a sector traditionally offering healthy dividends.
The Fidelity Preferred Securities & Income ETF (FPFD ) provides a different approach to a more specialized space, preferred securities. The strategy, which hit its three-year ETF milestone this past summer, charges a 59 bps fee. It actively invests in preferred and other income-producing securities like contingent convertible and corporate hybrid securities rated at least BB. Per Fidelity Investments data, its distribution yield sat at 4.77% as of November 4th.
Finally, the Fidelity High Dividend ETF (FDVV ) explicitly focuses on income via dividends. The strategy takes an indexed approach, tracking large and mid-cap developed market stocks. Charging 15 bps, the fund offers long-term investors the potential for income on top of its equity exposures. FDVV offers a 2.8% distribution yield per Fidelity Investments data.
The trio of income ETFs offer a set of pairings with more traditional bond-focused routes to income. For those looking to prepare clients for a new year or tax obligations, income ETFs may be an attractive option.
’_For more news, information, and analysis, visit the ETF Investing Channel._
Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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