The Dark Side Of Yield Hunting: Forget These ETFs

These days, everyone and his sister is talking about yield. Who could blame them? Yields on U.S. Treasuries stink. High-grade corporate bonds aren't much better. Money markets and CDs? You might find more yield under the mattress. Those unfortunate scenarios have put an emphasis on owning stocks and ETFs with solid yields and to be sure there really isn't a shortage of high-quality stocks and ETFs out there with noteworthy yields. However, when everyone is touting yield lost in the discussion is that not every stock or ETF with what can be considered an appealing or high dividend yield is worth an investor's time. The reality is there are plenty of yield traps out there. With that, let's look at some ETFs with yields above 4% that investors would do well to pass on over the next few months. (Yield data pulled from Yahoo Finance). iShares MSCI Spain Index Fund EWP: We mentioned this ETF as one to avoid yesterday and nothing has happened in 24 hours to change our minds. Give it 24 days and we'll probably feel the same way. Sure that 5.83% yield is "high," but this is a trap. Too many macro concerns and a weak chart ensure EWP could be sporting a 6% yield fairly soon. EGShares Financials GEMS ETF FGEM: The EGShares Financials GEMS ETF may have you thinking "Finally, a decent yield with bank stocks." Well yeah, that's true and FGEM does yield 4.4%. The rub here is obvious: Emerging markets and financials have been a toxic combination this year and there is really no need to be long an ETF that this heavily concentrated in Brazil, China and India right now. iShares S&P Global Infrastructure Index Fund IGF: One of these days, the global infrastructure spending theme is going to kick into high gear and the iShares S&P Global Infrastructure Index Fund should be a winner on the back of that theme. For now, the ETF is vulnerable. The yield is just over 4%, but more than a quarter of the ETF's is devoted to Euro Zone countries and China gets almost 5%. That's enough to make this one worth skipping over for the next few months. Guggenheim Shipping ETF SEA: It's not 2008-2009 all over again, but things are pretty bad for seaborne shipping stocks these days. One look at SEA's chart will tell you as much and some might wonder why the ETF isn't down more than 45.4% year-to-date. On a break below support at $14, SEA goes lower and the 7.5% yield that looks attractive now goes higher. Better ETF trading ideas can be found here. Vanguard MSCI Europe ETF VGK: Italy. France. Spain. Germany. Oh my. The Vanguard MSCI Europe is home to stocks from all those countries and plenty more. While VGK is home to some individual stocks worth considering such as Nestle NSRGY and Royal Dutch Shell RDS, any ETF that is this Europe-heavy is going to have more problems ahead of it. The 5.2% yield is bound to be higher in a matter of weeks, if not days.