4 Diverse ETFs With Big Yields

Yield is a vital part of any long-term portfolio. It provides consistent income whether stock prices are rising or falling. It often provides a "floor" to stock prices, as investors swoop into a falling stock when the yield becomes attractive. It seems since the financial crisis, investors have come back to the realization they need both yield and growth.

For this article, I have identified four high-yield exchange traded funds that invest in a broad array of asset classes. For the purpose of the article, I excluded fixed income and REIT ETF's. One of the ETF's, which is a fund of funds, has some holdings in fixed income assets.

PowerShares CEF Income Composite Portfolio (PCEF)

The PowerShares CEF Income Composite Portfolio seeks to track an index called the S-Network Composite Closed-End Fund Index. The index tracks the overall performance of a global universe of U.S.-listed closed-end funds. Barely one year old, the fund started on February 19, 2010. Its one year performance has been less than stellar, losing 1.6%. The fund's attractive yield, 8.8%, helps make up the difference. This fund of funds invests in a broad range of closed-end funds, including some fixed income.

Top Ten Holdings

PCEF Name Percent Weight Eaton Vance Tax-Mgd Glb Divrs Equity Inc 5.60% Alliance Bernstein Income Fund 4.00% NFJ Dividend, Interest & Premium Strat 3.70% Eaton Vance Limited Duration Income 3.30% Eaton Vance Tax-Managed Divrs Equity Inc 2.90% Nuveen Multi-Strategy Income & Growth 2 2.70% AllianceBernstein Global High Income 2.30% Eaton Vance Tx-Mgd Glbl Buy-Write Opp 2.20% Eaton Vance Risk-Mgd Divers Eq Inc 1.80% Nuveen Multi-Strategy Income & Growth 1.80%

PCEF has total assets of $195 million. It trades, on average, 46,000 shares per day. It isn't the most liquid fund, but does provide more liquidity than many of the underlying CEF's. The expense ratio is a steep 1.62%.

Market Vectors Junior Gold Miners ETF (GDXJ)

The Market Vectors Junior Gold Miners ETF seeks to track the performance of the Market Vectors Junior Gold Miners Index. The fund invests in small to mid-cap companies involved in the mining of gold. Some companies may also have exposure to other metals. The fund is up an astounding 45% over the last twelve months. The fund also offers a very attractive distribution yield of 7.64%. Distributions are paid annually. If you are a fan of the yellow metal this may be the fund for you.

Top Ten Holdings

GDXJ Name Symbol Percent Weight Hecla Mining Company HL 4.80% Coeur D'Alene Mines Corporation CDE 4.10% Silver Standard Resources SSRI 3.70% Alamos Gold Inc. AGIGF 3.70% Allied Nevada Gold Corp ANV 3.60% Gabriel Resources GBRRF 3.60% Silvercorp Metals SVM 3.50% European Goldfields EGFDF 3.20% Detour Gold Corporation DRGDF 3.10% Fronteer Gold, Inc. FRG 2.70%

The fund began on November 11, 2009 and has $2.3 billion in assets. The fund is very liquid, with about 2.5 million shares traded daily.

I am not a big fan of gold at these levels. That said, I do know that most investors need some exposure to precious metals. I prefer the physically backed ETFs for this exposure. Morningstar states that GDXJ is "extremely risky". Therefore I would not recommend it as a core holding for exposure to gold. However, for a speculative play or a small yield boost, this fund would suffice. GDXJ has an expense ratio of 0.59%.

iShares S&P US Preferred Stock Index Fund (PFF)

The iShares US Preferred Stock Index Fund seeks to track the performance of the S&P U.S. Preferred Stock index. The fund invests in preferred stocks with a market cap over $100 million. Preferred shares generally have a higher yield than bonds and are somewhat less interest rate sensitive. PFF is weighted very heavily toward financial assets at 83%. The fund is relatively volatile. However, the 7.28% distribution yield helps to smooth out volatility. The fund pays distributions monthly. As you can see from the fund's chart, the shares tanked during last year's flash crash. Subsequently the fund regained all of its losses and more over the course of 2010.

Top Ten Holdings

PFF Name Percent Weight General Mtrs Cv 3.10% Hsbc Hldgs Pfd 2.30% Barclays Bk Pfd 2.10% Bk Amer Pfd 1.80% Ford Mtr Co Cap Tr II Pfd 1.70% Metlife Pfd 1.70% Wells Fargo Cap Iv Pfd 1.70% Bk Amer Pfd 1.60% Countrywide Cap V Pfd 1.50% Citigroup Cap Viii Pfd 1.40%

PFF is the only fund on this list that I personally own. Despite its price volatility, the monthly distributions have provided an excellent return. PFF was established in March, 2007. It has $6.7 billion in assets and trades more than a million shares daily. This is the most liquid way to gain exposure to preferred stock. PFF has an expense ratio of 0.48%.

PowerShares Dynamic Building & Construction Portfolio (PKB)

The PowerShares Dynamic Building & Construction Portfolio seeks to track the Dynamic Building & Construction Intellidex(SM) index. The fund normally invests at least 80% of its assets in common stocks of building and construction companies. Obviously there have been better places to be invested over the last few years. PKB is down 15% over the last three years, as housing has been mired in recession. The fund has a distribution yield of 5.65%. If you think housing will eventually come back (it will), this may be a fund worth looking into.

Top Ten Holdings

PKB Name Symbol Percent Weight Weyerhaeuser Company WY 5.90% Quanta Services, Inc PWR 5.80% D.R. Horton Incorporated DHI 5.40% NVR, Inc. NVR 5.30% Fluor Corporation FLR 5.20% Home Depot, Inc. HD 5.10% URS Corporation URS 4.80% Lowe's Companies Inc LOW 4.80% Team, Inc. TISI 3.00% Dycom Industries, Inc. DY 3.00%

Whenever housing does bounce back the stocks held in this fund should perform well. In fact, the fund has been a decent performer over the last twelve months in anticipation of a bounce back. PKB was established in 2005, during the height of the housing boom. The fund is small, with net assets of about $46 million. It trades approximately 70,000 shares daily. The fund has an expense ratio of 0.63%.

These four funds offer great yield and serve as a starting place for investors to do deeper research. Yield is a very important part of any investor's portfolio. Always analyze an ETF to determine if you are better off buying the ETF or some of the underlying securities. Never buy an ETF solely based on its yield.

Disclosure: I am long PFF.