The stocks in the S&P 500 are divided into eleven business sectors. The State Street Select Sector SPDR ETFs let investors pick which sectors they believe have the best return potential.
For stocks this year, there has been a wide range of returns across different sectors. Year-to-date returns have ranged from a negative 5.3% for the Communication Services Sector SPDR to a positive 32.2% from the Energy Sector SPDR ETF.
This quite jumbled chart shows the year-to-date returns for all eleven sectors.
If you follow my analysis and writings, you know my focus is on income investments, generally high-yield investments. I was pleased to learn that last year State Street started offering Premium Income versions of the Select Sector SPDRs. The income funds use covered call strategies to pay significant yields. Let’s look at a couple of those ETFs. How about a couple of funds where the Sector SPDR is near breakeven for the year?
- The State Street Financial Select Sector SPDR Premium Income ETF (XLFI) has a distribution yield of 11.25%, compared to 1.42% for XLF
- The State Street® Health Care Select Sector SPDR Premium Income ETF (XLVI) yields 11.78%, compared to 1.56% from XLV
If you want to play market sectors, the high-yield versions of the Select SPDRs offer attractive yields, leveling out the potential returns.
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