4 Ways to Generate Income Beyond Core Bonds

On the Aug. 17, 2026, episode of The Morning Filter podcast, host Susan Dziubinski talks with Morningstar Indexes Strategist Dan Lefkovitz about his column on income opportunities for investors today. Here is an excerpt from the show.

MLPs Can Boost Income, but Don’t Go All In

Susan Dziubinski: MLPs, of course, can be another tool in an income-seeker’s toolkit. Explain what MLPs are in broad strokes, and then talk a little bit about the tax considerations here specifically.

Dan Lefkovitz: MLPs, master limited partnerships, are securities that trade on the stock exchange like corporations, but they pass through their income to investors. Most MLPs are in the energy space. They’re in the business of transporting oil and gas. They’re also known as pipeline companies. They’re sometimes referred to as the midstream of the energy value chain.

Dziubinski: How do the yields compare on MLPs versus some of the other income sources we’ve talked about here? And again, pros and cons.

Lefkovitz: Yields are high. We have a Morningstar MLP Composite Index. The yield is currently 7.6%. Very volatile. This is a very narrow segment, very correlated to energy prices, which bounce around a lot and are hard to predict. Much more volatile than bonds, of course, and even a more diversified basket of dividend payers, but more capital appreciation potential as well.

Dziubinski: It sounds like you wouldn’t want to go all in on MLPs as your income source from a portfolio.

Lefkovitz: Yeah, but definitely a tool in the toolkit.

Why Bank Loans Stand Out in Today’s Income Market

Dziubinski: Bank loans, another income option. What sort of yields are we talking about here?

Lefkovitz: This is a really interesting asset class. Syndicated bank loans have really grown as a market, as a source of funding for below-investment-grade companies. You’re taking on some credit risk here. This is very different from a core bond allocation when it comes to volatility, when it comes to diversification benefits vis-à-vis stocks. But what’s interesting about bank loans is they have floating-rate coupons. Unlike bonds, they actually benefit when interest rates rise. In recent years, we’ve seen the yields come up. We have a Morningstar Leveraged Loan Index, and the yield is currently 8.7%.

Dziubinski: Wow. OK. That’s a pro: the yield on these instruments. What would you say are some of the things to be aware of?

Lefkovitz: Just that volatility, and they’re going to behave more like stocks from a diversification perspective. You’re not getting the same kind of benefits as a core bond allocation.

High-Yield Bonds: More Like Stocks Than Core Bonds

Dziubinski: High-yield bonds are below-investment-grade. What do high-yield bond index yields look like today?

Lefkovitz: This is an asset class that used to be called junk bonds back in the 1980s. It’s become a lot more mainstream, gone through some rebranding to high-yield bonds. Not quite what it once was, the asset class, because of the rise of private credit as well as bank loans, the syndicated bank loans, as a source of borrowing for those sub-investment-grade borrowers, companies. Our US High-Yield Bond Index is about 7.5%, 7.6% currently. Below bank loans, but still pretty impressive. Similar to what I said for bank loans, these are going to be more volatile. They’re going to be closer to stocks on the spectrum than a core bond allocation.

Should You Invest in REITs After Their Runup?

Dziubinski: Think of them a little bit more like your stock allocation, not your bond allocation.

Dan, lastly, let’s talk about one more tool in the income-seekers’ toolkit, and that’s REITs. They’ve actually had a pretty good year. How are yields looking these days?

Lefkovitz: Real estate investment trusts, similar to MLPs. This is a tax structure, and they pass through most of their income to investors. Our US REIT Index is currently at 4.7%. There’s been a runup this year after many down years for real estate-related companies. It’s partly related to the AI data center buildout, but there are some other reasons as well. I think REITs were oversold. They’ve come back a little this year. From that income perspective, about the same really as core bonds.

Dziubinski: Again, pros and cons.

Lefkovitz: Similar to MLPs, very volatile. You’re in a narrow sector, real estate, which has faced some headwinds in recent years, if you think about hybrid work arrangements, if you think about elevated interest rates. I think, from a valuation perspective, just got a little bit oversold. Our REIT analysts still think that there are some attractive opportunities in the REIT space.

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