3 Diversified Factor ETFs Making Traction In This Market

Looked at a chart of stocks lately? It’s difficult to conjure up any sense of enthusiasm in the price action over the last year. We have endured two pernicious drops that have been snatched from the jaws of defeat at seemingly the last moment. Only to experience a concomitant rip roaring rally that fizzles near the highs. This type of whipsaw action is where nervous investors get shaken out near the lows and stressfully forced back in at the worst possible time.

Fact: The SPDR S&P 500 ETF (SPY) is sitting on a gain of +0.21% over the last twelve months. That’s with dividends included.


The tough part is that it’s becoming increasingly difficult for stock investors to find creative ways to eke out gains in this environment. Sectors have been a hit or miss proposition to say the least. You could always buy a little gold, but who knows what that will do over the next year.

If you’re like me, you want to keep your stock exposure broad, but with a specific theme such as low volatility, high quality, or even dividend-focused. Fortunately, those themes have shown a trend of outperformance recently that may represent an opportunity for your ETF watch list.

iShares Core High Dividend ETF (HDV)

I have written extensively about HDV over the course of my career and it continues to stand out among its peers. This ETF owns 75 large and mid-cap stocks of companies that have paid consistently high dividends and are also screened for financial health. Top holdings include well-known names such as Exxon Mobil (XOM) and Verizon Communications (VZ).

HDV has $5 billion in assets under management, charges a miniscule expense ratio of 0.12%, and has a 30-day SEC yield of 3.42%. Dividends are paid quarterly to shareholders.

A look at the comparative chart shows just how far this fund has surpassed the market benchmark over the last year. This divergence really took off near the start of 2016 as we started to see a strong bid under consumer staples and energy stocks. These two sectors makeup nearly 40% of the asset allocation within HDV.

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Disclosure: At the time this article was written, David Fabian and clients of FMD Capital Management owned shares of USMV.The views expressed by Aaron Jackson are ...

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