These Widely Overlooked Securities Yield up to 16%

Exchange-traded products (ETPs) are wildly popular. Their assets grew more than 30% a year during the past decade, compared to just 5% to 6% for mutual funds [1], according to McKinsey & Co. The management consultancy projects ETP assets will more than double over the next five years to $3.1-$4.7 trillion, from a little over $1.5 trillion today.

Most of the growth is in exchange-traded funds (ETFs), a subclass of the exchange-traded product family. But a handful of exchange-traded notes (ETNs) are also a small part of this market [2].

 And while there are ETFs for everything from copper to cocoa, ETNs offer [3] a unique type of exposure to mainly two high-yield groups: master limited partnerships (MLPs) and business development companies (BDCs).

Readers of my High-Yield Investing [4] newsletter know that I'm a big fan of MLPs and BDCs. These unique businesses allow investors to capture higher yields than many blue chip stocks and bonds [5].
MLPs are in the pipeline business, transporting oil and natural gas from the drilling site to the "downstream [6]" facilities such as refineries and storage facilities. They earn a fee based on the volume [7] transported, and in turn are not as sensitive to energy prices as drilling companies, for example. This provides a reliable stream of income, much of which is passed right on to investors in the form of sizeable dividends. (more)