The Federal Reserve recently raised interest rates by 75 basis points for the fourth consecutive time, bringing the benchmark interest rate to a target of 3.75-4%, the highest level since January 2008. Fed Chair Jerome Powell indicated a slower pace of rate hikes in the future but added that it is “very premature” to consider a pause and that the terminal rate would go higher than expected.
While the October CPI data shows slightly eased inflation, the 7.7% increase over the last year is way above the Fed’s 2% target. So, the implication of this slightly relieving data may not be significant for the central bank’s policy.
Since the stock market is expected to remain under pressure in the upcoming months, it could be wise to invest in dividend-paying ETFs, JPMorgan Ultra-Short Income ETF (JPST) and iShares U.S. Aerospace & Defense ETF (ITA), to ensure a stable income stream.
JPMorgan Ultra-Short Income ETF (JPST)
JPST is an actively managed, ultra-short-term, broad-market bond fund that aims to maximize income and preserve capital. The fund makes investments in fixed-rate, variable-rate, and floating-rate debt, including corporate issues, asset-backed securities, and debt pertaining to mortgages, as well as U.S. government and agency debt, including treasury securities.
JPST has assets under management of $22.10 billion. The fund has a total of 494 holdings. Its top holdings include the U.S. dollar with a 44.35% weighting, fixed income (unclassified) at 1.81%, BNP Paribas S.A. 3.5% at 0.96%, and Nordea Bank AB (New York) FRN at 0.83%.
JPST has an expense ratio of 0.18%, lower than the category average of 0.64%. Over the past six months, JPST's fund inflows came in at $3.14 billion, and $4 billion over the past year. Also, it has a beta of 0.04, indicating extremely low volatility compared to the broader market. The ETF pays an annual dividend of $0.41, which yields 0.80% on the current price.
JPST has declined marginally over the past six months to close the last trading session at $50.07.
JPST’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
JPST has a grade of A for Trade and Buy & Hold. It has a B grade for Peer. Of the 32 ETFs in the A-rated Ultra-Short Term Bonds group, JPST is ranked #2.
To access all JPST’s POWR Ratings, click here.
iShares U.S. Aerospace & Defense ETF (ITA)
ITA tracks a market-cap-weighted index of U.S. manufacturers, assemblers, and distributors of airplane and defense equipment. The companies followed by this fund are generally large, slow growing but remarkably stable due to the widespread use of long-term government contracts for most of their services.
ITA tracks Dow Jones U.S. Select Aerospace & Defense Index. The fund has $4.14 billion in assets under management. It has a total of 37 holdings. The fund’s major holdings include Raytheon Technologies Corporation (RTX) with 20.93% weighting, Lockheed Martin Corporation (LMT) with 17.17% weighting, and Boeing Company (BA) with 8.65%.
ITA has an expense ratio of 0.39% compared to the 0.45% category average. The ETF pays a $0.89 dividend annually, yielding 0.83% at the current price. ITA’s fund inflows came in at $287.63 million over the past six months and $1.48 billion over the past year.
ITA has gained 12.7% over the past month and 10.3% over the six months to close the last trading session at $108.81. It has a beta of 1.26.
ITA's strong fundamentals are reflected in its POWR Ratings. The ETF has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
ITA has an A grade for Trade, Peer, and Buy & Hold. It is ranked #2 among 36 ETFs in the A-rated Industrials Equities ETFs group.
To access all the POWR Ratings for ITA, click here.
JPST shares were trading at $50.09 per share on Thursday afternoon, up $0.02 (+0.04%). Year-to-date, JPST has gained 0.32%, versus a -16.65% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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