Protecting Junk Bond Principal With a Volatility Hedge

Thursday, April 26th, 2012 | Vance Harwood
 

At the moment investment grade bonds with their low yields and risky exposure to interest rates are unattractive places to put your money.   Broad equity indexes like the S&P 500 have higher potential gains and dividend yields in the 2% range, but the dramatic drawdowns of 2008/2009 are still fresh in our minds.   Commodities like gold and oil look expensive—so where is a good place to put your money?

Below investment grade bond funds like SPDR’s JNK or iShares HYG are yielding in the 7% range.   The interest rate risk of these “junk” bond ETFs is less than investment grade instruments because their yield is dominated by default risk rather than prevailing interest rates.   If interest rates on highly rated bonds climb due to improved macro economics the non-investment grade yields stay relatively stable because corporate defaults decline during good economic times.

The prices of high yield ETFs tend to follow the general equity market because stocks prices are well correlated with the risks of corporations defaulting on their debt.  The chart below shows the performance of $1000 invested in SPY (S&P 500) and JNK over the last few years.

 

SPY vs JNK including dividends

 

During the 2008/2009 crash JNK bottomed out with a  38% decline.   SPY declined 51%.

Volatility based tail risk funds like Barclays’ XVZ provide a way protect the principal of high yield bonds against severe market declines without giving up their interest rate advantages.  For more information on XVZ see under the hood and backtest to 2004. The chart below shows the performance of $1000 invested in SPY, XVZ, JNK, and a hedged investment where 28%  is put in XVZ and the rest in JNK.

High Yield Backtest

 

The respective compound annual growth numbers including dividends for this 4 year period were 2.6% (SPY), 28.5% (XVZ), 6.5% (JNK) , and 15.7% for the hedged approach.

You might ask, why not just put it all in XVZ?  It had the best overall return, but the drawdowns (peak to trough) of 16% and 25% during the backtest time period would be hard for me to live with.    The hedged portfolio on the other hand never dropped substantively below the starting level and its worst case drawdown was 9.2%.    In the simulation I rebalanced the XVZ / JNK position quarterly and invested any accumulated dividends.

Risk factors include the fact that XVZ has only been trading since August of 2011, so its demonstrated track record is short.   The high yield bond funds themselves are highly diversified, with JNK currently holding 227 different investments and HYG holding 504, but there are concerns that their current surge in popularity ($12 billion in inflows in the last 6 months), will result in increased risk and potential liquidity problems.  That’s something I will be monitoring, but currently the overall sub-investment grade bond market is around $1 trillion, so the all the high yield ETFs together comprise less than 2% of that.

 



Monthly ETF Dividend Amounts

Monday, February 13th, 2012 | Vance Harwood
 

Tickers covered:  AGG, BIL, SCJ, HYG, IEF, INY, JNK, LAG, LQD, MUB, PFF, TIP, TLT

For dividend history data and charts from 2005 on click here.

You can use the search window within the post (upper right) to search for a specific ticker, or increase the number of entries to show in the upper right box to 25 in order to see all the symbols.

SYMBOL--DESCRIPTIONNovember Ex-dividendNovember Distribution
AGGAGG iShares Barclays Aggregate Bond Fund1-Nov-137-Nov-13
BILBIL SPDR Barclays Capital 1-3 Month T-Bill ETF1-Nov-1312-Nov-13
CSJCSJ iShares Barclays 1-3 Year Credit Bond Fund1-Nov-137-Nov-13
HYGHYG iShares High Yield Corporate Bond Fund1-Nov-137-Nov-13
IEFIEF iShares Barclays 7-10 Year Treasury Bond Fund1-Nov-137-Nov-13
INYINY SPDR Barclays Capital New York Municipal Bond1-Nov-1312-Nov-13
JNKSPDR Barclays Capital High Yield Bond1-Nov-1312-Nov-13
LAGLAG SPDR Barclays Capital Aggregate Bond1-Nov-1312-Nov-13
LQDiShares iBoxx $ Investment Grade Corporate Bond1-Nov-137-Nov-13
MUBiShares S&P National AMT-Free Municipal Bond Fund1-Nov-137-Nov-13
PFFPFF iShares S&P U.S. Preferred Stock Index1-Nov-137-Nov-13
TIPiShares Barclays TIPS Bond1-Nov-137-Nov-13
TLTiShares Barclays 20+ Year Treasury Bond1-Nov-137-Nov-13

 

For more ETF ex-dividend and pay dates see this post.

 



Dividend History

Wednesday, December 28th, 2011 | Vance Harwood
 

I’ve recently created a tool for generating dividend history reports on any of the iShares and SPDR ETFs.

You can access it here: Dividend History Report.

Links to a few selected pre-generated reports are shown below:

DIA dividend history

DVY dividend history

IWM dividend history

JNK dividend history

LQD dividend history

SPY dividend history

TIP dividend history

XLP dividend history

XLU dividend history

If you need dividend history on a non iShare / SPDR fund or stock then I recommend the DividendInvestor site.

 

 



2014 Dividend, Ex-Dividend, and Paydate / Distribution information for ETFs

Friday, February 28th, 2014 | Vance Harwood
 

I have collected dividend, ex-dividend, paydate/distribution  information for 2014 on the following ETFs.

Alerian:  AMLP


Guggenheim:

Quarterly Group I:  EWEM, EWRI, EWRM, EWRS, RSP, RCD, RGI, RHS, RTM, RYE, RYF, RYH, RYT, RYU, RFG, RFV, RPG, RPV, RZG, RZV, XLG

 

iShares

iShares: AGG CMF CSJ HYG IEF IEI IGOV ISHG LQD PFF SHV SHY TIP TLH TLT

iShares: AGZ CFT CIU EMB GBF GVI MBB MUAA MUAB MUAC MUAD MUAE MUAG MUB NYF SUB

iShares: DVY, DSI, IAI, IAK, IAT, IDU, IEO, IEX, IHE, IHF, IHI, ITA, ITB, IYC, IYE, IYF, IYG, IYH, IYK, IYM, IYR, IYT, IYW, IYJ, IYY, IYZ, KLD … DVY dividend history

iShares:  IJJ   IJH   IJK IJR    IJS   IJT  ISI   IVE   IVV  IVW   OEF

iShares MSCI:  EEM, EFA, EPP, EWC, EWH, EWY, EWZ and Others

iShares Russell: IWB   IWC   IWD    IWM   IWO   IWR   IWS   IWP  IWV   IWW    IWZ

 

PIMCO:  AUD  BABZ  BOND  BUND  CAD  CORP  FIVZ  HYS  ILB  LTPZ  MINT  MUNI  SMMU  STPZ  TENZ  TIPZ  TRSY  TUZ  ZROZ

 

Schwab
Schwab Monthly Distributions:   SCHP, SCHO, SCHR, SCHZ

Schwab Quarterly and Annual Distributions:  SCHA, SCHB, SCHC, SCHD, SCHE, SCHF, SCHG, SCHH,SCHM, SCHV, SCHX

Schwab Quarterly Distributions:  FNDB, FNDX, FNDA

 

SPDR

SPDR:  BIL  BMX  CWB  CXA   INY IPE   ITE  ITR  (jnk)JNK   LAG  LWC MBG MWZ  SJNK SHM  TFI  TLO VRD WIP
SPDR: DIADIA Dividend HistoryDIA Dividend Capture

SPDR: XLB, XLE, XLF, XLI, XLK, XLP, XLU, XLV, XLY

SPDR: MTK, SLYG, SLYV, SPYG, DGT, SLY, SDY, XRT, DWX and others 

SPDR: SPY

 

Vanguard
Vanguard Summary of all the tickers below: Vanguard Summary

Vanguard Monthly Distributions: BND, BSV, VGLT, BIV, VCSH, BNDX, VWOB

Vanguard Monthly Distributions: VCIT, VCLT, VGSH, VMGS

Vanguard Quarterly Distributions: VFH, VNQ, VUG, VOO

Vanguard Quarterly Distributions: VIG, VTI, VTV, VV, VYM

Vanguard: Quarterly Distributions: VWO, VGK, VEU, VSS, VNQI, VEA, VGK, VPL, VXUS, VT, EDV, MGV, MGC, VPU

Vanguard Semi-annual Distributions:  VO, VOT, VB, VBR, VBK, VOE, VXF

Vanguard Annual Distributions : VAW, VDE, VGT, VCR, VDC, VHT, VIS, VOX, VTIP

 

Archival / Reference Information from SPDR and iShares

 



2014 Ex-Dividend: JNK, SJNK, BIL, ITE, TLO, IPE, LAG, TFI, CXA, INY, SHM, BMX,WIP, MBG, ITR, MWZ, LWC, CWB, VRD, and Others

Monday, March 3rd, 2014 | Vance Harwood
 

2014 Ex-Dividend and Pay Date information from SPDR

Click here for JNK dividend history

2014 Ex-Dividend Dates
3-Feb 3-Mar 1-Apr 1-May 2-June 1-July
1-Aug 2-Sept 1-Oct 3-Nov 1-Dec 29-Dec
Pay / Distribution Dates
11-Feb 11-Mar 9-Apr 9-May 10-June 10-July
11-Aug 10-Sept 9-Oct 12-Nov 9-Dec 7-Jan-2015



In alphabetical order:

BABS SPDR Nuveen Barclays Build America Bond ETF (BABS)
BIL SPDR Barclays 1-3 Month T-Bill ETF (BIL)
BWX SPDR Barclays International Treasury Bond ETF (BWX)
BWZ SPDR Barclays Short Term International Treasury Bond ETF (BWZ)
CBND SPDR Barclays Issuer Scored Corporate Bond ETF (CBND)
CWB SPDR Barclays Convertible Securities ETF (CWB)
CXA SPDR Nuveen Barclays California Municipal Bond ETF (CXA)
EBND SPDR Barclays Emerging Markets Local Bond ETF (EBND)
EMCD SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF (EMCD)
FLRN SPDR Barclays Investment Grade Floating Rate Bond ETF (FLRN)
HYMB SPDR Nuveen S&P High Yield Municipal Bond ETF (HYMB)
IBND SPDR Barclays International Corporate Bond ETF (IBND)
INY SPDR Nuveen Barclays New York Municipal Bond ETF (INY)
IPE SPDR Barclays TIPS ETF (IPE)
ITE SPDR Barclays Intermediate Term Treasury ETF (ITE)
ITR SPDR Barclays Intermediate Term Corporate Bond ETF (ITR)
JNK SPDR Barclays High Yield Bond ETF (JNK)
LAG SPDR Barclays Aggregate Bond ETF (LAG)
LWC SPDR Barclays Long Term Corporate Bond ETF (LWC)
MBG SPDR Barclays Mortgage Backed Bond ETF (MBG)
SCPB SPDR Barclays Short Term Corporate Bond ETF (SCPB)
SHM SPDR Nuveen Barclays Short Term Municipal Bond ETF (SHM)
SJNK SPDR Barclays Short Term High Yield Bond ETF (SJNK)
SRLN SPDR Blackstone / GSO Senior Loan ETF (SRLN)
SST SPDR Barclays Short Term Treasury Bond ETF (SST)
TFI SPDR Nuveen Barclays Municipal Bond ETF (TFI)
TIPX SPDR Barclays 1-10 Year TIPS ETF (TIPX)
TLO SPDR Barclays Long Term Treasury ETF (TLO)
ULST SPDR SSgA Ultra Short Term Bond ETF (ULST)
VRD SPDR S&P VRDO Municipal Bond ETF (VRD)
WIP SPDR DB International Government Inflation- Protected Bond ETF (WIP)
XOVR SPDR BofA Merrill Lynch Crossover Corporate Bond ETF (XOVR)

Looking for ex-dividend information for other ETFs? Check this page.

If you would like the dividend history for another security, see this post.