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Guide to High Dividend Paying ETFs

The hunt for dividend in the equity market is always on irrespective of how it is behaving. After all, who doesn’t like a steady stream of current income along with capital gains? And if investors are mired in a web of equity market uncertainty, global growth worries and geopolitical crisis, the lure for dividend investing will increase.

Investors should note that not all dividend stocks serve the same purpose. While the high-yield ones are known for offering hefty current income, stocks with dividend growth point to quality investing — a pre-requisite to making money in this volatile environment. Notably, the year 2020 was a bit difficult for dividend investing due to the corporate cash crunch and announcement of dividend cuts.

But things have been changing from the year 2021. S&P Dow Jones Indices announced in early January that indicated dividend gain in 2021 was $69.8 billion compared to 2020's decline of $40.8 billion. U.S. common dividend increases were $78.6 billion in 2021, up 89.7% year over year, as decreases in dividends fell 89.3% to $8.8 billion in 2021 from the massive $82.2 billion in 2020.

Meanwhile, the rise in interest rates is now common globally as central banks are intending to contain inflation. However, several U.S. economic data points have come in decent lately, which lessened recessionary fears to some extent.

Inflation in the United States moderated slightly as energy and gasoline prices dropped. This is especially true as the consumer price index (“CPI”) jumped 8.5% year over year in July, down from a 9.1% year-over-year increase in June, which was the fastest increase since November 1981. The producer price index (PPI) showed prices fell 0.5% sequentially compared to expectations of a 0.2% increase.

U.S. consumer sentiment rose in August from a record low earlier this summer, and American households' near-term outlook for inflation fell. The University of Michigan's preliminary August reading on the overall index on consumer sentiment came in at 55.1, up from 51.5 in the prior month. It had touched a record low of 50 in June. All these have boosted the risk-on trade sentiments in the market and boosted long-term treasury yields.

Why to Pick High-Dividend Securities

In the above-said scenario, investors may be interested in equities that have the potential to offer capital appreciation as well as benchmark-beating yields. After all, dividends are one of the ways to ride out the turbulent times.

Even if the stock or the fund falls, higher current income would go a long way in protecting investors’ total returns. After all, high-dividend ETFs provide investors avenues to make up for capital losses, if that happens at all.

We thus have zeroed in on some high-dividend ETFs.   

ETFs in Focus

Global X SuperDividend ETF SDIV

The underlying Solactive Global SuperDividend Index tracks the performance of 100 equally weighted companies that rank among the highest dividend-yielding equity securities in the world. The index provider applies certain dividend stability filters. The 100-stock ETF charges 58 bps in fees and yields 12.89% annually.

SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

The underlying S&P 500 High Dividend Index is designed to measure the performance of the top 80 dividend-paying securities listed on the S&P 500 Index, based on dividend yield. The fund yields 7 bps in fees and yields 3.65% annually.

Vanguard High Dividend Yield ETF VYM

The underlying FTSE High Dividend Yield Index which consists of common stocks of companies that generally pay higher-than-average dividends. The fund charges 6 bps in fees and yields 2.92% annually. 

Global X SuperDividend U.S. ETF DIV 

The underlying INDXX SuperDividend U.S. Low Volatility Index tracks the performance of 50 equally weighted common stocks, MLPs & REITs that rank among the highest dividend-yielding equity securities in the United States. The fund yields 5.60% annually and charges 45 bps in fees.

iShares Core High Dividend ETF HDV

The underlying Morningstar Dividend Yield Focus Index offers exposure to high-quality U.S. domiciled companies that have had strong financial health and the ability to sustain above-average dividend payouts. The fund HDV charges 8 bps in fees and yields 3.00% annually.

 

 


 


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SP Plus Corporation (SP): Free Stock Analysis Report
 
iShares Core High Dividend ETF (HDV): ETF Research Reports
 
Vanguard High Dividend Yield ETF (VYM): ETF Research Reports
 
Global X SuperDividend U.S. ETF (DIV): ETF Research Reports
 
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