ETF of the Day - Corporate Bond ETF $LQD

The iShares iBoxx Corporate Bond ETF ($LQD) has been perplexing lately to say the least, however a recent turnaround has the ETF back on my list of favorites for the next 1-2 years.

We made our first purchase of LQD on 3/6/09. This was the day the S&P 500 bottomed. Since that time the S&P 500 is up 82%. LQD is up 42% including dividends. The argument is that LQD is greatly under performing the broad equity market. And yes it sure is, however it is a bond ETF, not an equity ETF and it turned out to be a top steady performer for our clients.

The ETF fell from a multi-year high of $115.68 on 11/4 down to a low of 11/28 of $109.81. This is a big drop for a bond ETF. I began adding more LQD last week for clients that need to gain exposure to the sector and in the last few days the ETF has created a bottom at $110 and looks like a very attractive long-term option.

LQD currently pays a dividend of 4.5% and with corporate America not falling apart all we care about is the companies paying their quarterly interest payment. As long as that continues, which I feel it will, corporate bonds are priced to move higher!