Income investors are always on the hunt for income investments that offer a steady stream of cash alongside capital appreciation.
But with the investment landscape constantly shifting, keeping track of the current yield, average annual return, and risk associated with popular income options can be a challenge.
This article dives into some of the most popular income investments and explores their current state of play. Here is a list o popular income investments:
1. Master Limited Partnerships (MLPs): MLPs offer high dividend yields, often exceeding 6%. However, their payouts can be volatile, and their TAX treatment can be complex. Additionally, MLPs are sensitive to energy prices.
➤ Average annual return: 8.7% with 14% risk.
2. Real Estate Investment Trusts (REITs): REITs own and operate income-producing real estate. They are required to pay out a significant portion of their TAXable income as dividends, making them attractive to income investors. REITs can offer diversification and some hedge against inflation, but their performance can be tied to the real estate market.
➤ Average annual return: 8.1% with 24% risk.
3. Dividend Stocks: Companies with a history of paying regular dividends can be a good source of income. However, dividend yields can fluctuate, and there is no guarantee that a company will continue to pay dividends.
➤ Average annual return: 7.4% with 19% risk.
4. S&P 500 Index Fund: While not traditionally considered an income investment, the S&P 500 index fund, which tracks the performance of 500 large-cap U.S. companies, has historically offered a combination of capital appreciation and dividend growth. However, the stock market is inherently volatile, and past performance is not a guarantee of future results.
➤ Average annual return: 7.1% with 21% risk.
5. Corporate Bonds: Corporate bonds provide fixed income payments, but the risk and return vary depending on the creditworthiness of the issuing company. Investment-grade bonds offer lower yields but are considered safer, while high-yield bonds (also known as junk bonds) offer higher potential returns but come with greater risk of default.
➤ Average annual return: 6.2% with 9% risk.
6. 10-Year Treasury: The 10-year Treasury note is a benchmark for fixed-income investments. It offers a relatively safe and predictable stream of income, but the yields are typically lower than those of other income investments on this list.
➤ Average annual return: 3.7% with 6% risk.
NOTE: The dividend yield, average annual return and the risk on some popular income investments differ year-to-year.
It is crucial to consider your risk tolerance and investment goals when choosing income investments. Diversification is key to mitigating risk. Consulting with a financial advisor can help you create a personalized investment strategy that aligns with your income needs and risk profile.
The information provided is for informational purposes only and should not be considered financial advice. It is important to stay up-to-date on current yields and market conditions before making any investment decisions.
