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MJ: Yes, The Marijuana ETF Has Provided A Steady 6-7% Yield

Published Mon, 21 Sep 2020 15:31:30 -0400 on Seeking Alpha

Seeking AlphaDividend IdeasMJ: Yes, The Marijuana ETF Has Provided A Steady 6-7% YieldSep. 21, 2020 3:31 PM ET|| About: ETFMG Alternative Harvest ETF (MJ), Includes: ACB, CGC, CRON, SKT, SPCE, SPY, TLRYby: Dave Dierking, CFADave Dierking, CFA ETF investing, portfolio strategy, Dividend Investing, retirementEtf Focus On The Street.Com.cls-1{fill:#024999;}SummaryWith the Fed aiming to keep rates near zero for at least the next few years, income seekers will need to venture out on the risk spectrum for higher yields.
One pretty unconventional sector that could help fill the income gap is marijuana.
The fund's largest underlying components don't pay a dividend, but securities lending allows MJ to pay a 6%+ yield.
I'll examine MJ one more time to review the income generation process and discuss its place within an income portfolio.
Investment Thesis
With Treasuries mostly yielding less than 1% and the S&P 500 yielding less than 2%, dividend income seekers are going to have to venture outside of more conservative asset classes to find higher yields.
That means assets such as MLPs, REITs and junk bonds. But one sector you'd probably never consider as a yield play has actually been yielding 6-7% over the past year - marijuana.
While the sector can be expected to remain volatile over the coming years, the yield does have some sustainability and could remain well above average, but you have to be comfortable with some risk.
The FOMC just announced that it plans on keeping interest rates at near record low levels until at least 2023. If you're an equity investor, that's probably good news as it clears the way for easy money, cheap borrowing and higher stock valuations for the foreseeable future.
If you're an income seeker, not so much.
Unless the Fed somehow creates the hyperinflation scenario it hasn't been able to since the early 1990s, get used to 0% savings rates, CD rates of less than 1% and only ~3% yields on even... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
TANGER FACTORY OUTLET CENTERS 16.50   21.4 0.77 1.42 8.35
SPDR S&P 500 ETF 301.29   0.0 0.00 5.42 1.82


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