3 Monthly Income ETFs for Upswing in Bonds

As such, advisors on the lookout for monthly income ETFs may want to consider three such strategies from Franklin Templeton that could benefit from recent inflows into bond funds, with the high yield bond, corporate bond, and municipal national interim bond categories taking in $7.7 billion, $3.6 billion, and $5.5 billion respectively over the last month.

The actively managed WBND has an annual dividend yield of 6.5%, more than double both the ETF Database Category Average and FactSet Segment Average. WBND has less than 15% volatility in each of the four volatility time frames compared to other peer ETFs, with a beta measure of 0.25 and a 45 basis point fee.

WBND invests in a broad spectrum of fixed income offerings including corporate bonds, Treasuries, and CDOs with positions limited for high yield, CDOs, non-USD-denominated debt, and non-U.S. issued debt at 10%, 30%, 25%, and 30% respectively, among others.

WBND has performed well over the last month, returning 6.3%, once more doubling up on both the ETF Database Category Average and the FactSet Segment Average in that time. The ETF has also seen a recent uptick in flows, from net outflows over the last month to almost balancing out inflows and outflows over the last five days on net.

FLHY is also actively managed, specifically targeting the high yield corporate bond subsector of the fixed income space. FLHY has an annual dividend yield of 4.9% according to VettaFi, higher than both the ETF Database Category Average of 3.5% and the FactSet Segment Average of 2.5%. FLHY has seen 84.5% volatility over the last five days, with a beta measure of 0.42 and a 40 basis point fee.

FLHY targets U.S.-dollar denominated junk-quality corporate bonds, while being able to complement its riskier offerings with bank loans, corporate loans, and convertible securities. The strategy also weights the U.S. dollar at 4.7% to balance its riskier corporate bond holdings.

The monthly income ETF has returned 4.5% over one month, beating both the ETF Database Category Average and FactSet Segment Average in that time frame. The ETF has seen an uptick in flows in recent weeks, taking in net inflows of $2.2 million over the last month.

Actively managed FLCO is somewhat similar to FLHY, instead targeting the investment-grade corporate bond category. FLCO has an annual dividend yield of 3.7%, compared to 1.8% and 2.1% for the ETF Database Category Average and the FactSet Segment Average, respectively. The ETF has seen 40.2% volatility over the last five days, with no volatility percentage higher than 12% over the longer windows of time.

FLCO offers a low beta exposure of 0.23 and charges a 35 basis point fee. The ETF has returned 4.9% over one month, beating the ETF Database Category Average. Bringing in $21 million over the last month, the ETF has returned 4.9% over one month as well.

Holding the U.S. dollar as its second-largest weight at 2.4%, the strategy offers a focus on higher-quality investment-grade corporate bonds while capping overseas exposure to 40% of its assets. The strategy’s 35 basis point fee gives it some slight breathing room compared to its 40 basis point-charging sibling FLHY.

Income is on the minds of investors, and with the challenge of finding the right bond still facing many advisors and investors alike, a crop of monthly income ETFs like the three above from Franklin Templeton could be an interesting play as the year begins to draw to a close.

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VettaFi is an independent publisher and takes responsibility for our edit staff, research, and postings. Franklin Templeton is not affiliated with VettaFi and was not involved in drafting this article. The opinions and forecasts expressed are solely those of VettaFi and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.