Earn 3% to 5% Yield From Investment-Grade Bonds

Corporate bonds and government-agency and mortgage-backed securities can all deliver more income than Treasuries. The additional yield embedded in these investment-grade bonds should also help them retain more of their value if interest rates do eventually climb.

Earnings for All

• Bank Accounts: 1%-4%
• Municipal Bonds: 1%-3%
• Real-Estate Investment Trusts: 2%-6%
• Foreign Bonds: 3%-6%
• Preferred Stocks: 4%-7%
• Closed-End Funds: 5%-11%
• High-Yield Bonds: 6%-8%
• Master Limited Partnerships: 5%-11%

Risks to your money. Higher rates would depress prices of existing bonds. Other pitfalls include credit-rating downgrades or signs that corporate balance sheets are coming under pressure.

Hire a pro. Fidelity Corporate Bond (FCBFX (opens in new tab), 3.8%) focuses on high-quality, intermediate-term bonds to pump out a robust stream of income. Pimco Income Fund (PONDX (opens in new tab), 3.4%), a member of the Kiplinger 25 (opens in new tab), includes a broad mix of bonds, including corporate IOUs, mortgage-backed securities and some junk issues. Moreover, its bonds mature in an average of six years, limiting interest-rate risk. Vanguard Intermediate-Term Investment-Grade (VFICX (opens in new tab), 2.6%) invests mainly in high-caliber bonds at the shorter end of the maturity spectrum—qualities that should help the fund hold up if the bond market takes a tumble. For a pure play on corporate bonds, consider exchange-traded iShares Core U.S. Credit Bond ETF (CRED (opens in new tab), $110, 3.2%). (All prices and returns are as of March 31.)

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Do it yourself. Individual IOUs can be a good way to pocket reliable income that won’t fluctuate over the lifetime of the bonds (unlike a fund, whose yield can bob around). Bonds issued by chip maker Qualcomm look attractive, says Scott Kimball, comanager of the BMO TCH Core Plus Bond Fund. The tech firm’s bonds maturing in 2025 yield 2.9% and earn an A rating for quality. Also compelling are bonds from drugmaker Abbvie, rated single-A and yielding 4.2% to their 2035 maturity. In the financial sector, Kimball likes bonds issued by financial giant Citigroup, rated triple-B and yielding 4.3% until they come due in 2026. None of the bonds is callable before the maturity date, he adds, making all of them solid choices for steady income.

Next: REITs to Earn 2% - 6%