By Sean Hyman During a recession, everyone is looking for a little extra income. And many investors are turning to dividends to get that income.

But the reality is that it’s difficult to find good growth stocks that pay decent dividends. (I only know a few seasoned professionals who can consistently find those types of dividend-paying investments.)

Yesterday, I told you how to earn interest (or essentially “dividends”) on key high-yielding Forex trades – particularly the Aussie dollar.

But the truth is, you don’t have to set up a Forex account to earn dividends on your currency investments. In fact, you can place currency trades through your regular old boring stock account, and earn dividends on a few key plays.

It’s all possible with currency exchange traded funds (ETFs). Check out the visual below.

Currency ETFs: Yielding as Much as 5%!

Basically, all you have to do is call your run-of-the-mill stockbroker and ask to buy a currency ETF (either from Rydex above, or you can look into some of the other offerings from WisdomTree, PowerShares, or ProShares.). Then assuming the currency ETF rises in your favor, then you’ll earn gains off both the appreciation and dividends just like any high-yielding stock.

In fact, many of these ETFs actually outpace high-yielding stocks. For instance, you can buy a Russian ruble ETF or Australian dollar ETF that keeps pace with many high-dividend yielding stocks…yet it will outpace them in appreciation.

The Mexican peso ETF is yielding a whopping 5%+ right now. Sure, the Swine Flu beat this ETF down for a while, but it’s now trading with an even higher yield. So let’s say you had US$10,000 invested in the peso ETF…you could earn US$515 right now this year just in income just for holding the peso. That doesn’t count the potential appreciation of the currency.

Of course, dividends cut the other way too. If you’re shorting a currency ETF, you have to pay those dividends yourself if the currency moves against you.

But the good news is if you choose a currency that’s severely depressed, it could appreciate as much as 30% in a year or two. This would beat most mutual funds and many stocks right now while earning more in interest than most of them too.

I’ll be back tomorrow with more strategies to use currencies in your portfolio. Till then…

Best Regards,
Sean

P.S. By the way, my colleagues Chuck Butler and Ashish Advani run a currency newsletter that focuses on long-term, buy and hold currency plays that can add both interest and extra dividends to your portfolio. Click here for details.

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