The rest of the income world offers a mixed bag that may be best held as part of a diverse income portfolio. Real Estate Investment Trusts had a great 2014 and appear expensive. Like junk bonds, they offer a slim yield premium over Treasuries for the risk. For exposure, consider iShares Dow Jones U.S. Real Estate, an ETF.
Master limited partnerships (MLPs) are mostly tied to the oil and gas industry, which is in a funk, with oil near $45 a barrel. Avoid those with yields above 10 percent, a signal they may cut their payout. Consider capturing this group's attractive income through Alerian MLP, an ETF with a 6.5 percent yield. Warning: MLPs come with complicated tax rules and may be best held in an IRA.
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Preferred stocks offer yields in the 5 percent to 6 percent range but give you little of the upside of common stocks. They also come in many flavors that may be difficult for individuals to vet. Here again, an ETF like PowerShares Preferred Portfolio, recently yielding 5.9 percent, might be the best choice.
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"I like all these strategies, and they work best when combined," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. In this low-yield environment, income investors have to look beyond traditional vehicles, which do little more than keep up with inflation. Holding a range of income investments, he said, "can give you a higher yield than traditional bonds with similar risk and which will adjust as rates rise."
—By Dan Kadlec, special to CNBC.com