Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.

2023-01-14 11:15

2 High Yield ETFs to Get You Through a Recession
I write a lot about growth stocks but let’s be clear: I have a lot of my personal portfolio in ETFs. Why? I think it’s good to have a balanced approach to investing. So even though my growth holdings took a major hit last year, my ETFs and their distributions managed to keep me afloat. Warren Buffett says that most investors are better off just holding a portfolio of low-cost index funds. If it’s good enough for Buffett, it’s good enough for me.

A lot of people scoff at ETFs claiming that they are boring and do not provide enough growth. It's true, most ETFs are slow-build and are meant for long-term investing. You can trade all of the growth stocks and options you want in the short-term, while still holding a base of ETFs in your account. Both of these things can be true. If you want to avoid some of the volatility in the markets right now, here are two high-yield ETFs that can get you through a recession in 2023 and beyond.

Schwab US Dividend Equity ETF (SCHD)
This ETF has been getting a lot of buzz on Twitter because of its dual strategy of long-term capital growth as well as high dividend payments. These are two things you want to grow your wealth with minimal downside risk. Last year, the ETF fell by about 5% which far outperformed the S&P 500 index. Why do I like this ETF? It has a really low MER of 0.06%. This means that for every $10,000 you have invested, Schwab only takes $6.00 in fees per year. It also has a solid 30-day SEC Yield of 3.30% which is also higher than the average dividend yield amongst S&P 500 companies. With that yield, you get paid about $0.70 per share every quarter or about $2.56 per share each year. This fund holds some of the best dividend-paying stocks in the US including Home Depot (NYSE: HD), Verizon (NYSE: VZ), Texas Instruments (NASDAQ: TXN), PepsiCo (NASDAQ: PEP), and Coca-Cola (NYSE: KO).

JP Morgan Equity Premium Income ETF (JEPI)
This is a newer ETF that provides more in the way of income flow than long-term growth. But in a recession, that kind of investment is a perfect way to grow your cash reserves. Now, this ETF has a much higher MER than SCHD as it sits at 0.35% compared to 0.06%. But to counter that, this ETF pays out a monster monthly dividend yield of 11.77%! How does it do this? JEPI is a covered call ETF that earns a premium on its out-of-the-money call options that it sells on its holdings. It pays these out to shareholders and takes the MER as a cost. It’s a great solution for investors who want to park a lot of money and get a steady stream of monthly income. This ETF holds some of the best blue-chip stocks including Mastercard (NYSE: MA), Exxon Mobil (NYSE: XOM), Coca-Cola, AbbVie (NYSE: ABBV), and UnitedHealth Group Inc (NYSE: UNH).