3 Stocks That High-Yield ETFs Are Betting On
The stock market has roared back to life in 2023 and has largely outperformed expectations. Investors have begun to pour back into the stock market in search of bargains. However, despite high returns in growth stocks, investors are still highly interested in seeking lower-risk securities. A typical way to go about doing that is to invest in high-yield exchange-traded funds (ETFs).
High-yield ETFs hold stocks paying above-average dividends or bonds making above-average interest payments. Some common high-yield ETFs include Vanguard High Yield Dividend ETF (NYSEARCA:VYM), which has exposure to well-established large-cap companies, such as JPMorgan Chase (NYSE:JPM) and Johnson & Johnson (NYSE:JNJ), and iShares Select Dividend ETF (NASDAQ:DVY), which has exposure to household names like Verizon (NYSE:VZ).
For those income investors in search of high yields, below is a list of three stocks that these high-yield ETFs are betting on.
Altria (MO)
Altria (NYSE:MO) manufactures and sells smokable and oral tobacco products. The company provides cigarettes under the well-known Marlboro brand. Its cigars and pipe tobacco are principally sold under the Black & Mild brand. Despite cigarettes and tobacco products being generally frowned upon in the U.S., Altria was able to rake in $25 billion in net revenue in fiscal year 2022.
Most importantly, the company paid a whopping $6.6 billion in dividends that year. These days, Altria’s dividend yield sits around 8.7%. Because of this, the company is included in a number of high-yield ETFs. For example, the iShares Select Dividend ETF has Altria as its largest holding at 2.59% of its $19.5 billion assets under management (AUM). First Trust Morningstar Dividend Leaders Index Fund (NYSEARCA:FDL), a $4 billion high-yield ETF, holds Altria Group at nearly 5% of AUM.
Recessions tend to have varying impact on smokers and non-smokers. Research has showed smokers tend to consume fewer tobacco products during a time of deteriorating economic outlook, while those new to smoking tend to pick up the habit. Although it is not sure which side of the coin will land for Altria, the company will most likely keep its high dividend. After all, it has increased its dividend 53 consecutive times.
Blackstone Secured Lending Fund (BXSL)
Blackstone Secured Lending Fund (NYSE:BXSL) is a business development company (BDC) owned by the major asset management firm Blackstone (NYSE:BX). Acting as a financial services company, BXSL offers mainly senior secured loans to U.S.-based private companies. These companies range across various sectors, including software, healthcare, insurance, aerospace and air freight.
As of March 31, the company’s portfolio investments were valued at $9.6 billion in fair value. Nearly 98% of these investments are first lien senior secured, with over 99% of the debt investments carrying a floating rate. Currently, BXSL’s portfolio consists of loans provided to 49 companies. Loan amounts ranging from approximately $67 million to over $348 million.
Blackstone Secured Lending’s dividend as of its Q1 2023 net asset value (NAV) was 10.7%. Furthermore, there are many high-yield ETFs holding the stock. The VanEck BDC Income ETF (NYSEARCA:BIZD), for one, has a 4.72% concentration in BXSL.
Although the lending markets have cooled since the U.S. Federal Reserve began hiking interest rates, investors have remained committed to reallocating capital to private credit vehicles as they continue to look for high yields. This, coupled with the fact BXSL is backed by a larger, well-established asset manager, should bode well for both the BDC and its high dividend payments in the long term.
Petrobras (PBR)
Founded in 1953 and headquartered in Rio de Janeiro, Petrobras (NYSE:PBR) is the state-run oil and natural gas behemoth from Brazil. Through selling oil and gas domestically and internationally, the company has business operations in exploration, production, refining, transportation, gas and power.
In 2022, global commodity prices skyrocketed, and elevated energy prices allowed Petrobras to profit immensely. In particular, Petrobras made $121 billion in revenue and $38 billion in net income. Its performance primarily came from the appreciation of the average Brent price for the year and higher sales of oil products, at higher average prices, in the Brazilian domestic market.
Petrobras’s large net income translated into huge dividends for shareholders. The company doled out more than $43 billion in dividend payments in 2022. Although Brent prices are stabilizing, Petrobras remains profitable and undervalued. In fact, PBR’s price-to-earnings (P/E) ratio on a trailing-12-month basis is only around 2x. Its dividend yield is at 32%.
The Amplify International Enhanced Dividend Income ETF (NYSEARCA:IDVO) is one of the high-yield ETFs betting on Petrobras. The company is the ETF’s third-largest holding.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
